Problem 7-07 Choose the correct security market line graph for each of the following conditions: a. (1) RFR = 0.09; RM(proxy) = 0.14 (2) R2 = 0.06; RM(true) = 0.15 The correct graph is graph BV A. Security market Line 0.18 0.16 0.14 10.12 0.1 10.08 10.00 10.04 10.02 2 Beta SML proxy SML true B. Security market Line 10.18 10.16 10.14 0.12 10.1 10.08 0.06 10.04 10.02 N- Beta SML proxy SML true C. Security market Line 10.18 10.16 10.14 0.12 10.1 10.08 10.06 0.04 0.02 2 Beta SML proxy SML true D. Security market Line 10.18 10.16 10.14 0.12 0.1 10.08 1.06 10.04 10.02 1 2 Beta SML SML true proxy Proxy b. Rader Tire has the following results for the last six periods. Calculate and compare the betas using each index. Do not round intermediate calculations. Round your answers to three decimal places. Period Rader Tire (%) RATES OF RETURN Proxy Specific Index (%) True General Index (%) 11 12 1 25 2 14 9 11 3 -12 -11 -8 4 18 15 16 5 19 24 29 6 -4 -9 0 Busing proxy: Busing true: c. If the current period return for the market is 12 percent and for Rader Tire it is 13 percent, are superior results being obtained for either index beta? Do not round intermediate calculations. Round your answers to two decimal places. E(RR)using proxy: % E(RR)using true: % Rader's performance would be -Select