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Required Rate of Return (%) SML 17.25 7 -SML 13.5 - -- 11 - - -- 0 0.5 1.0 1.5 2.0 0 0.5 1.0 1.5

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Required Rate of Return (%) SML 17.25 7 -SML 13.5 - -- 11 - - -- 0 0.5 1.0 1.5 2.0 0 0.5 1.0 1.5 2.0 Based on the above-given graph answer the following questions: 1. What is the Risk-free rate? 2. For SML1, What is the value of r if the beta is equal to 0.5? 3. What is the value of the market risk premium for SML1? 4. What is the value of the risk premium for SML2 at beta 0.85

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