Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Assume that the risk-free rate, RF, is currently 9% and
that the market return, rm, is currently 13%.
a. Draw the security market line (SML) on a set of
"nondiversifiable risk (x axis)-required return (y axis)"
аxes.
b. Calculate and label the market risk premium on the
axes in part a.
c. Given the previous data, calculate the required
return on asset A having a beta of 0.80 and asset B
having a beta of 1.30.
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