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    Security Market Line (SML). Assume that risk-free rate, Rf is currently 9% and that the market return, Km, is currently 13%. Draw the security market line on a set of "nondiversifaible risk (x-axis)?required return (y-axis)" axes.

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    II.
    Tasks:
    Chapter 5: Risk and Return
    P5-26 Security Market Line (SML)

    Question Details
    P5-26
    Security Market Line (SML). Assume that risk-free rate, Rf is currently 9% and that the market return, Km, is currently 13%
    A. Draw the security market line on a set of "nondiversifaible 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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