I know the answer, I am asking for Drawing

1-Claim Denied Insurance Company has a beta of 1.2. Assume that the risk-free rate of return is 5 percent and the market risk premium is 6 percent. What is the expected return on the overall stock market?

E(r_M) - r_f = market risk premium

E(r_M) - 5% = 6%

E(r_M) = 6% +5% =11%

2-As in Question 1, Claim Denied Insurance Company has a beta of 1.2. Assume that the risk-free rate of return is 5 percent and the market risk premium is 6 percent. What is the appropriate required return on Claim Denied Insurance Company stock?

E(r_C ) =r_{f +BC} [E(r_M ) - r_f ]

= 5% + 1.2[6%] = 5% + 7.2%

= 12.20%

Draw the SML for the market in questions 1 and 2. Show the positions of:

1) The risk-free asset (F)

2) The market portfolio (M)

3) Claimed denied insurance company stock on the SML. (C)