Estimated rate of returns T- Bills Nescom Nawab PK_Steel 3% -14.25 12.25 1.75 State of the Recession Probability 0.1 Pak Market portfolio -9.75 Below average 0.2 3% -4.75 5.25 -8.25 -2.75 0.4 3% 6.25 -0.5 0.25 19.25 3% -2.5 average Above average Boom Expectred Returns St. Deviation 0.2 0.1 13.75 21.25 3.75 11.25 17.75 3% -10 11.75 0% CV Beta 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? 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