Over the past 70 years, the return on the market (S&P 500 index) exceeded the risk-free rate by an average of 6-8%. In other words, the market risk premium (RM-RRF) has averaged between 6-8%. For your calculations, assume the market risk premium (RM-RRF) is equal to 6.5%. Given your assumed MRP and your answer to #6 above, calculate the required rate of return for your portfolio listed in Table 3. Use the formula from the CAPM (the SML line equation) Rs=RRF + (RM-RRF) Beta. In other words, what is the required rate of return on the portfolio using the CAPM? ________________________(Show your work.)

Table 3

Company # Company Name / Ticker / Dollar Amount Invested /Beta (from Morningstar)

1 Ford F $27,000 / beta - 1.36

2 Wal-Mart Stores Inc WMT $33,000- 0.07

3 Home Depot HD $50,000- 1.06

4 3M MMM $20,000 - 0.92