Security market line (SML)Assume that the risk-free rate, Upper R Subscript Upper FRF, is currently 9% and that the market return, is currently

13%..

a.Draw the security market line (SML) on a set of "nondiversifiable risk (x axis) - required return (y axis) axes.

b.Calculate and label the market risk premium on the axes in part a.

c. Given the previous data, calculate the required return on asset A having a beta of 0.8 and asset B having a beta of 1.3.

d.Draw the betas and required returns from part c for Assets A and B on the axes in part a. Label the risk premium associated with each of these assets and discuss them.