Security market line(SML)Assume that therisk-free rate, RF, is currently 4% and that the marketreturn, rm, is currently 7%.

a.Calculate the market risk premium.

b.Given the previousdata, calculate the required return on asset A having a beta of 0.4 and asset B having a beta of 1.5.

1.The market risk premium is ...?%. (Round to one decimalplace.)

2.If the beta of asset A is 0.4, the required return for asset A is ....?%. (Round to one decimalplace.)

If the beta of asset B is 1.5, the required return for asset B is ....?%. (Round to one decimalplace.)

No2.

Manipulating CAPMUse the basic equation for the capital asset pricing model (CAPM) to work each of the following problems.

a.Find the required return for an asset with a beta of 0.49 when therisk-free rate and market return are 3% and 8%, respectively.

b.Find the risk-free rate for a firm with a required return of 11.184% and a beta of 1.09 when the market return is 11%.

c.Find the market return for an asset with a required return of 11.761% and a beta of 1.17 when therisk-free rate is 9%.

d.Find the beta for an asset with a required return of 12.764% when therisk-free rate and market return are 7% and 11.4%, respectively.

1.The required return for an asset with a beta of 0.49 when therisk-free rate and market return are 3% and 8%, respectively, is ....?%. (Round to two decimalplaces.)

2.Therisk-free rate for a firm with a required return of 11.184% and a beta of 1.09 when the market return is 11% is ...?%. (Round to two decimalplaces.)

3. The market return for an asset with a required return of 11.761% and a beta of 1.17 when therisk-free rate is 9% is ......?%. (Round to two decimalplaces.)

4.The beta for an asset with a required return of 12.764% when therisk-free rate and market return are 7% and 11.4%, respectively, is .....? (Round to two decimalplaces.)