Enter queAnalysis of a financial model used in decision-making implies a thorough understanding of what it can and cannot reveal about financial data. Managers need to understand the strengths and limitations of a financial metric, in order to employ it effectively. Before class Day 3, explain how the Capital Asset Pricing Model (CAPM) works. What are the strengths and weaknesses of the CAPM? (You may need to review Chapter 8 in Fundamentals of Financial Management to fully answer this question.) Using each of the four stocks you selected for your portfolio in the Week 4 discussions, calculate the Security Market Line (SML) equation for each stock. Assume a U.S. Treasury rate of 3% as the risk free rate in your SML. Use the beta for your stock as presented in http://finance.yahoo.com/. What does the SML tell you about your portfolio of stocks? How can the SML assist in predicting the expected return on your stocks? Below are my chosen 4 stocks I picked DELL, AAPL, GOOG and YHOO. From Yahoo Finance, we find that the betas are DELL = 1.39, AAPL = 1.04, GOOG = 1.13, YHOO = 0.94