Suppose that the equation for the SML is Y = 0.05 + 0.07X, where Y is the average expected rate of return, 0.05 is the vertical intercept, 0.07 is the slope, and X is the risk level as measured by beta. What is the risk free interest rate for this SML? What is the average expected rate of return at a beta of 1.5? What is the value of beta at an average expected rate of return of 7 percent?
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Home » Business » Suppose that the equation for the SML is Y = 0.05 + 0.07X, where Y is the average expected rate of return, 0.05 is the vertical intercept, 0.07 is the slope, and X is the risk level as measured by beta.