Problem solving: Assume that the risk-free rate, RF, is currently 9% and that the market...
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Problem solving: Assume that the risk-free rate, RF, is currently 9% and that the market return, km, 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 .80 and asset B having a beta of 1.30. d. Draw in 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
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