The Treasury bill rate is 5%, and the expected return on the market portfolio is 12%. On the basis of Capital Asset Pricing Model:
a. Draw a graph (Security Market Line) showing how the expected return varies with beta (i.e., risk-return relationship).
b. What is the risk premium of the market?
c. What is the required return of an investment with a beta of 1.5?
d. If an investment with a beta of .8 offers an expected return of 11%, does it have a positive NPV?