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The Treasury bill rate is 3% (r f ) and the expected return on the market portfolio is 13% (r m ). Using the capital
The Treasury bill rate is 3% (rf) and the expected return on the market portfolio is 13% (rm). Using the capital asset pricing model with the aforementioned assumptions regarding risk free rate and market rate to answer the following questions:
A) Draw a graph similar to Figure 8.7 (found on p. 208, within chapter 8 of our textbook) showing how the expected return varies with beta, graphing the return and beta of each data point please. rf will start at 3% and 0 beta, for market, rm of .13 and beta of 1.0 Security Market Line 0.25 Exp Return 0.2 0.15 RM 0.1 0.05 RE 0 0 0.5 2. 2.5 1 1.5 Beta - Stock/Portfolio Volatility This is an embedded Chart of the SML for #4, which you may use to add data points, etc. B) What is the risk premium on the market? C) What is the required return on an investment with a beta of 1.5? Is the beta above or below the Market betaStep by Step Solution
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