(Answered) Recall that the secuirty market line sml illustrates the

Finance

Recall that the secuirty market line (SML) illustrates the relationship between systematic risk and expected returns. Perhaps the most famous and practical application of the SML is the capital asset pricing model (CAPM), as follow: E(Ri) = Rf + [E(Rm) [] Rf] X []

a. Define each of the variables or terms in this equation?

b. Calcuate the E(Ri), assuming E(Rm) equals 12%, Rf equals 6%, and [] equals 1.2?

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