• The Treasury bill rate is 3%, and the expected return on the market portfolio is 13%. Using the capital asset pricing model with the aforementioned assumptions regarding risk free rate and market rate to answer the following questions:

• Draw a graph similar to Figure 8.6 (found also on Slides 8-24 to 8-26, apart from chapter 8 in textbook) showing how the expected return varies with beta.

• What is the risk premium on the market?

• What is the required return on an investment with a beta of 1.5? Is the beta above or below the Market beta?

Ifaninvestmenthasanexpectedreturnof9.8%(andaBetaof.8),wouldthisprojectbeconsideredtohaveanacceptableNPV?Why?If the internal rate of return was calculated to be 9.8%, would we accept the project given the expected return calculated in part D, in other words, given the CAPM calculated in part D? If the market expects a return of 11.2% from stock X, what is its beta (Here we solve for Beta, using all given components of CAPM, except beta which is not given we )