Estimated rate of returns Beta Security Nescom 5% 1.5 Market 4 1 Pk Steel 3.5 0.75 T Bills 3 0 Nawab 1 -0.6 9. Assumes that the risk-free rate is 3.0%, and risk premium is expected return on market portfolio less risk. Write out the security market line (SML) equation; use it to calculate the required rate of return on each alternative? How do the expected rates of return compare with the required rates of return? Identify the undervalued companies