Suppose there is a risk-free asset whose return is 5% and that the market portfolio has
an expected return of 9%. The standard deviation of the market portfolio is given 20%.
(a) Find the security market line.
(b) Suppose there is an asset whose covariance with the market is given by 450%2. Find its equilibrium price according to CAPM.
(c) Consider an asset with i = 1:5 and expected return of 12%. Can an investor use this asset to make a risk-free prot through arbitrage?Explain your answer.