A. The return to the market is the market return at the point where beta is 1.0. On a graph of the Security Market Line, betas are on the horizontal axis and expected returns are on the vertical axis. At the point where beta is 1.0, the expected return is 12%.
B. 3% is the risk-free rate, according to this graph. The risk-free rate is the point where the Security Market Line intersects the Y axis, where beta is zero.
C. 9% is the market risk premium, according to this graph. The market risk premium is the difference between the risk-free rate and the return to the market.
D. It is not impossible to determine the return to the market from the graph.
