The risk free rate is 4 and the expected return on the

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The risk free rate is 4% and the expected return on the market portfolio is 12%. Please use the CAPM to answer the following questions.

(a) Draw a graph showing how the expected return varies with beta.

(b) What is the market risk premium?

(c) What is the required rate of return on an investment with a beta of 1.5?

(d) If an investment with a beta of 0.8 offers an expected return of 9.8%, does it have a positive NPV?

(e) If the market expects a return of 11.2% from a stock, what is its beta?

Reference no: EM13380802

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