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Explain each of the variable or terms in equation compute

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Reference no: EM13477425

Recall that the security market line (SML) illustrates the relationship between systematic risk and expected returns.  Perhaps the most famous and practical application of the SML is the capital asset pricing model (CAPM), as follows:  E(Ri)= Rf + [E(Rm) - Rf] X Bi

a. Define each of the variable or terms in this equation

b. Calculate the E(Ri), assuming that E(Rm) equals 12%, Rf equals 6%, and Bi equals 1.2.

Reference no: EM13477425

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