Draw the security market line

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Reference no: EM13223105

Draw the security market line for each of the following conditions

a) (1) RFR= 0.08; Rm (proxy)=0.12
b) Rader Tire has the following results for the last six periods. Calculate and compare the betas using each index.

Rates of Return

Period Rader tire Proxy specific index True general index
1 29% 12 15
2 12% 10 13
3 -12% -9 -8
4 17% 14 18
5 20% 25 28
6 -5% -10 0

C) If the current period return for the market is 12% and for Rader Tire it is 11%. Are superior results being obtained for either index beta?

Reference no: EM13223105

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