QUESTION 9

The general form of the Capital Asset Pricing Model (CAPM) is:

E(R_i) = R_f + [ E(R_M) R_f ]_i

Assume the following:

R_f = 5%

E(R_M) = 8%

_i = 0.5

With the above assumptions, CAPM suggests that:

	A.	E(Ri) = 6.5%.
	B.	E(Ri) = 17%
	C.	E(Ri) = 1.5%.
	D.	E(Ri) = 4.5%.
	E.	none of the above.