Basis of capital asset pricing model

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Reference no: EM131530294

The Treasury bill rate is 5%, and the expected return on the market portfolio is 12%. On the basis of Capital Asset Pricing Model:

a. Draw a graph (Security Market Line) showing how the expected return varies with beta (i.e., risk-return relationship).

b. What is the risk premium of the market?

c. What is the required return of an investment with a beta of 1.5?

d. If an investment with a beta of .8 offers an expected return of 11%, does it have a positive NPV?

Reference no: EM131530294

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