version of the CAPM holds. The expected return on the market portfolio is 17%, and on the zero-beta portfolio it is 8%. What is the expected return on a portfolio with a beta of .6? 21. The security market line depicts: a. A securitys expected return as a function of its systematic risk. b. The market portfolio as the optimal portfolio of risky securities. c. The relationship between a securitys return and the return on an index. d. The complete portfolio as a combination of the market portfolio and the risk-free asset. 22. Within the context of the capital asset pricing model (CAPM), assume: Expected return on the market 15%. Risk-free rate 8%. Expected rate of return on XYZ security 17%. Beta of XYZ security 1.25. Which one of the following is correct? a. XYZ is overpriced. b. XYZ is fairly priced. c. XYZs alpha is .25%. d. XYZs alpha is .25%. 23. What is the expected return of a zero-beta security? a. Market rate of return. b. Zero rate of return. c. Negative rate of return. d. Risk-free rate of return. 24. Capital asset pricing theory asserts that portfolio returns are best explained by: a. Economic factors. b. Specific risk. c. Systematic risk. d. Diversification. 25. According to CAPM, the expected rate of return of a portfolio with a beta of 1.0 and an alpha of 0 is: a. Between rM and rf. b. The risk-free rate, rf. c. (rM rf). d. The expected return on the market, rM.   The following table shows risk and return measures for two portfolios.   Average Annual Standard Portfolio Rate of Return Deviation Beta   R 11% 10% 0.5 S&P 500 14% 12% 1.0     26. When plotting portfolio R on the preceding table relative to the SML, portfolio R lies: a. On the SML. b. Below the SML. III. Equilibrium In Capital