Homework answers / question archive / Security market line? (SML)   Assume that the? risk-free rate, RF?, is currently 4?% and that the market? return, rm?, is currently 7?%

Security market line? (SML)   Assume that the? risk-free rate, RF?, is currently 4?% and that the market? return, rm?, is currently 7?%

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Security market line? (SML)   Assume that the? risk-free rate, RF?, is currently 4?% and that the market? return, rm?, is currently 7?%.

a.  Calculate the market risk premium.

b.  Given the previous? data, calculate the required return on asset A having a beta of 0.4 and asset B having a beta of 1.5.

1.  The market risk premium is ...??%. ?(Round to one decimal? place.)

2.  If the beta of asset A is 0.4?, the required return for asset A is ....??%. ?(Round to one decimal? place.)

If the beta of asset B is 1.5?, the required return for asset B is ....?%. ?(Round to one decimal? place.)

No2.

Manipulating CAPM   Use the basic equation for the capital asset pricing model ?(CAPM?) to work each of the following problems.

a.  Find the required return for an asset with a beta of 0.49 when the? risk-free rate and market return are 3?% and 8%?, respectively.

b.  Find the ?risk-free rate for a firm with a required return of 11.184?% and a beta of 1.09 when the market return is 11%.

c.  Find the market return for an asset with a required return of 11.761?% and a beta of 1.17 when the? risk-free rate is 9%.

d.  Find the beta for an asset with a required return of 12.764?% when the? risk-free rate and market return are 7?% and 11.4%?, respectively.

1.  The required return for an asset with a beta of 0.49 when the? risk-free rate and market return are 3?% and 8%?, ?respectively, is ....?%. ?(Round to two decimal? places.)

2.  The? risk-free rate for a firm with a required return of 11.184?% and a beta of 1.09 when the market return is 11% is ...?%. ?(Round to two decimal? places.)

3. The market return for an asset with a required return of 11.761?% and a beta of 1.17 when the? risk-free rate is 9% is ......?%. ?(Round to two decimal? places.)

4.  The beta for an asset with a required return of 12.764?% when the? risk-free rate and market return are 7?% and 11.4%?, ?respectively, is .....? ?(Round to two decimal? places.)