1.CAPM:

The risk-free rate is 3%. Refer to the following:

Portfolio (R):

E(r) = 11% // Standard Deviation = 10% // Beta = 0.5

Portfolio (Wilshire 5000):

E(r) = 14% // Standard Deviation = 12% // Beta = 1.0

A.When plotting portfolio R on the preceding table relative to the Security Market Line (SML), will portfolio R lie below/above/on the SML? Show by using the CAPM.

B.When plotting portfolio R on the preceding table relative to the Capital Market Line (CML), will portfolio R lie below/above/on the CML? Show by calculating the Sharpe Ratio.