27/12/2021 EXERCISE ON SML Joshua has got the offer to work with CIMB in Investment Department after his finished his studies in Bachelor in Finance. His first assignment is to investigate the expected rates of return for four stocks: Dutch Lady, Nestle, Maxis and IOI. Joshua's supervisor suggests that he make his estimates using the Capital Asset Pricing Model (CAPM), assuming the risk-free rate is 3 percent and the market risk premium is 8 percent. The information for the stocks as follows: Stocks Beta Dutch Lady Nestle Maxis IOI 1.5 1.2 0.5 -0.5 Portfolio (RM) 250,000 300,000 100,000 50,000 Expected Return (%) 24 20 12 6 Required: a) Calculate the required rate of return for each stock by using the CAPM. b) Plot the SML in the graph. Calculate the alpha and show in the graph d) Calculate the slope and show in the graph Calculate the risk premium by using the formula and proof the equivalent answer as in the graph f) Calculate the expected return portfolio and the beta portfolio g) Comment the outcome from the above