Question: 1. Let E(n) denote the expected return on asset i and B. denote the corresponding beta. In addition, let E(rm) denote the expected return on

1. Let E(n) denote the expected return on asset i and B. denote the corresponding beta. In addition, let E(rm) denote the expected return on the market portfolio and Bm denote the corresponding beta. Define and sketch the Security Market Line (SML). Hint: Use E(rm) - r = 8%, r = 3%, B. = 1.25 and B2 = 0.6. [12.5 marks)

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