On pages 375-376, the text discusses the security market line, also known as the CAPM. The Capital Asset Pricing Model (CAPM) states that expected return of a stock portfolio is based on the following formula:

R = RFR + (MR - RFR)

where:

R is the expected rate of return

RFR is the risk-free rate of return (such as a t-bill)

MR is the market rate of return

is the beta

CALCULATE THE RATE OF RETURN FOR A PORTFOLIO, USING THE FOLLOWING GIVEN NUMBERS: RFR is 3%, MR is 9%, is .5

Expected rate of return = _____________