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I NEED A GOOD AND DETAIL EXPLANATION AND I NEED Calculations, Formulas and Graphs that support the answers. PLEASE THANK YOU. 4. The risk-free interest

I NEED A GOOD AND DETAIL EXPLANATION AND I NEED Calculations, Formulas and Graphs that support the answers. PLEASE THANK YOU.

4. The risk-free interest rate is 5% and the expected return on the market portfolio is 12%. Assuming the CAPM assumptions are met:

a) What is the market risk premium?

b) What is the required return on an investment with a beta of 1.5?

c) If an action has a Beta=1 and offers an expected yield of 10%, is it overvalued?

d) Draw a chart showing how the expected performance varies with Beta.

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