1. Consider the CAPM. The risk-free rate is 4%, and the expected return on the market is 18%. What is the expected return on a stock with a beta of 1.2?
A. 6%
B. 15.6%
C. 18%
D. 20.8%
2. The CAL provided by combinations of 1-month T-bills and a broad index of common stocks (i.e. market portfolio) is called the ______.
A. SML
B. CAPM
C. CML
D. total return line