Question: Problem 4) what is the risk free rate ? Problem 8) what is the marker risk premium? CHAPTER 13 THE STANDARD CAPITAL ASSET PRICING MODEL

Problem 4) what is the risk free rate ?

Problem 8) what is the marker risk premium?

CHAPTER 13 THE STANDARD CAPITAL ASSET PRICING MODEL 309 5. Write the CAPM shown in Problem 4 in price form. 6. Show that the standard CAPM should hold even if short sales are not allowed. 7. Assume that an asset exists with R3 = 15% and B3 = 1.2. Further assume the security market line discussed in Problem 1. Design the arbitrage opportunity. 8. If the following assets are correctly priced on the security market line, what is the return of the market portfolio? What is the risk-free rate? R1 = 9.40% B1 = 0.80 R2 = 13.40% B2 = 1.30 9. Given the security market line R; = 0.07 + 0.09Bi What must be the returns for two stocks, assuming their Bs are 1.2 and 0.9? BIBLIO

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