How do you work this problem to arrive at Rf=4% ? Example 3: A stock has a of 0.5 and an expected return of 6%. Expected returns on the S\&P 500 are 8%. What is the expected yield on T-bills? Solution 3: E(R) =R4+++[E(Rm)R4]6=R1+0.5[8R4]R1=4%.

1. How do you work this problem to arrive at Rf=4% ?
Example 3: A stock has a of 0.5 and an expected return of 6%. Expected returns on the S&P
500 are 8%. What is the expected yield on T-bills?
Solution
3: E(R) =R4+++[E(Rm)R4]6=R1+0.5[8R4]R1=4%