2 G H PARTI The yield curve is currently flat; that is, long-term Treasury bonds also have a 3.0% yield. Consequently, Merrill Finch assumes that the risk-free rate is 3.0%. (1) Write out the SML equation, use it to calculate the required rate of return on each alternative, and graph the relationship between the expected and required rates of return. 55 Risk-free rate 56 RPM 57 If Beta =1 then: CAPM= = = = CRF 0.0% 0.00% = = = FRE 0.0% 0.00% 59 THT 60 61 HT 62 63 M 64 65 66 67 TUS 68 LSR 69 LSR 70 71 Too 72 m 73 K S PRE Bus = = = 0.88 0.0% 0.00% = = = 0.00 PRE 0.0% 0.00% 108 Case model What would be the market risk and the required return of a 50-50 portiollo of Hightech and Collections w Bu Wall 1 B B = = ( u - ra) 19 For a portfolio consisting of 65% High Tech and 35% U.S. Rubber? 00 wer But 31 B 32 B 23 B = = = 95 p = 96 te 98 100 101 102 08 Case model + 2 G H PARTI The yield curve is currently flat; that is, long-term Treasury bonds also have a 3.0% yield. Consequently, Merrill Finch assumes that the risk-free rate is 3.0%. (1) Write out the SML equation, use it to calculate the required rate of return on each alternative, and graph the relationship between the expected and required rates of return. 55 Risk-free rate 56 RPM 57 If Beta =1 then: CAPM= = = = CRF 0.0% 0.00% = = = FRE 0.0% 0.00% 59 THT 60 61 HT 62 63 M 64 65 66 67 TUS 68 LSR 69 LSR 70 71 Too 72 m 73 K S PRE Bus = = = 0.88 0.0% 0.00% = = = 0.00 PRE 0.0% 0.00% 108 Case model What would be the market risk and the required return of a 50-50 portiollo of Hightech and Collections w Bu Wall 1 B B = = ( u - ra) 19 For a portfolio consisting of 65% High Tech and 35% U.S. Rubber? 00 wer But 31 B 32 B 23 B = = = 95 p = 96 te 98 100 101 102 08 Case model +