Security market line-market risk premium on the axes

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Reference no: EM131519748

Security market line (SML) Assume that the risk-free rate, Upper R Subscript Upper FRF, is currently 9% and that the market return, is currently 13%..

a. Draw the security market line (SML) on a set of "nondiversifiable risk (x axis) - required return (y axis) axes.

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 0.8 and asset B having a beta of 1.3.

d. Draw the betas and required returns from part c for Assets A and B on the axes in part a. Label the risk premium associated with each of these assets and discuss them.

Reference no: EM131519748

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