The common stock of Alpha Manufacturers has a beta of 1.14 and an actual expected return of 15.26%. The risk-free rate of return is 4.3% and the market rate of return is 12.01%. Answer the following questions.

What is the market risk premium?

Plot the security market line (SML) and clearly label the points on the line which correspond to (1) the risk-free portfolio and to (2) the market portfolio.

Based on the CAMP, what is the required return on the stock of Alpha Manufacturers?

Show the point which corresponds to the stock of Alpha Manufacturers on the SML chart. Is it above, below, or on the SML?

Is the stock of Alpha Manufacturers underpriced, overpriced, or fairly priced?