a) Assume that the risk-free rate is 7 per cent and the expected market return is 13 per cent. Show the security market line equation.

b) The table below provides values of beta for six companies. Calculate the required rate of return, k_i, for each company using the security market line, and evaluate which securities are overvalued and which are undervalued.

Stock Code	Company Name	Beta (i)	Annual Return (Ri)	Required Return (ki)	Remark
FAB	Facebook Bhd	1.58	8.6%
PKB	Parkland Bhd	0.94	32.5%
KIB	KI Bank	1.16	16.5%
GNB	Gurney Bhd	1.21	24.8%
OMB	1Malaysia Bhd	1.15	9.50%
DRM	DoReMi Bhd	0.50	32.0%