Compute the rate of return on an asset using the SML

Please show all work so I can understand your conclusion.

An asset has a beta of 1.6. The risk-free rate is 6 percent, and the market risk premium is 8 percent. Using the SML, estimate the required rate of return on this asset.

Solution Summary

With a formula and a sentence of explanation, the problem was solved.

5) Therate on Treasury bills is 4 percent, and the equity risk premium is 10 percent. Use theSML to estimate thereturn on each of the above stocks.
Security Standard deviation Correlation with market
A 0.30 0.70
B 0.75 0.30
C 0.45 0.50
D 0.50 0.16
6) Maria has decided to invest $5,000 in each of the above

Need assistance in explaining these two parts
Part 1) Suppose rf is 5% and rM is 10%. According to theSML and the CAPM, an asset with a beta of −2.0 has a required return of negative 5% [= 5 − 2(10 − 5)]. Is this be possible, why or why not?
Part 2) Does this mean that theasset has negative risk? Why

Please see attachment
Textbook: Essentials of Investments
Chapter 7 (1, 2, 3, 6, 16, 18, and 32)
1. Which of the following statements about the security market line (SML) are true?
a. TheSML provides a benchmark for evaluating expected investment performance.
b. TheSML leads all investors to invest in the same

A portfolio that combines the risk-free asset and the market portfolio has an expected return of 22 percent and a standard deviation of 5 percent. The risk-free rate is 4.9 percent, and the expected return on the market portfolio is 19 percent. Assume the capital-asset pricing model holds.
What expected rate of return would

A. UsingtheSML of the CAPM, calculate the required rate of return that would be approprite to evaluate the stock of Hewlett-Packard. Base the expected market return on the average S&P 500 rate of return over the last four years. Assume a beta of 0.95. (Use finance.yahoo.com for data, and put data on excel spreadsheet)
Usin

Millar Motors has a beta of 1.30 and an expected dividend growth rate of 5.00% per year. The T-bill rate is 3.00%, and the T-bond rate is 6.00%. The annual return on the stock market during the past 3 years was 15.00%. Investors expect the annual future stock market return to be 12.00%. UsingtheSML, what is Millar's required r

The Capital Asset Pricing Model (CAPM) is a widely used concept in finance. The model is expressed graphically by the Security Market Line (SML). Within the context of investment, explain how CAPM can be useful to investors.

See the attached file.
Question 1. How are theSML and the CAPM related (Draw the appropriate graphs and explain)?
Question 2. A stock's current dividends are $1.50 and its expected to grow at 10 percent annually. Suppose its required rate of return equals 15 percent. The stock's recent market price is $120. What is its i

A regression was run between Stock B and the market proxy portfolio, the S&P 500. The regression line is defined as: Y = 8.3 + 1.2X. If the risk-free rate is 4 percent, the market risk premium is 6 percent, and the market return on Stock B is 10.5 percent,
(a) graph the security market line (SML) for Stock B.
(b) determine