The betas for each of the assets are given in the table below. The risk-free rate of return is 4% and the market rate of return is 12% (or the market risk premium is 8%). Please fill out the blanks in the table. Note that the betas for the market portfolio and the risk-free security are intentionally left blank.

Security Beta Expected return based on CAPM Reward to risk ratio(R-Rf/beta)

stock a 0.50

stock b 0.75

stock c 1.50

stock d 2.0

market port.

risk-free asset

Present draw the Security Market Line (SML) and mark the six securities in the above table.

If you believe that the return on Security D is 22%, should you buy the security or not? Please explain