Is the real world security market line a line

Reference no: EM131235379

1. Is the real-world security market line a line?

2. Draw the security market line if the risk-free rate is 5% and the equity premium is 10%.

3. What is the equity premium, both mathematically and intuitively?

4. A corporate bond with a beta of 0.2 will pay off next year with 99% probability. The risk-free rate is 3% per annum, and the equity premium is 5% per annum.
(a) What is the price of this bond?

(b) What is its promised rate of return?

Reference no: EM131235379

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