What is its promised rate of return?

1. Is the real-world security market line a line?
2. Draw the security market line if the risk-free rate is 5% and the equity premium is 10%.
3. What is the equity premium, both mathematically and intuitively?
4. A corporate bond with a beta of 0.2 will pay off next year with 99% probability. The risk-free rate is 3% per annum, and the equity premium is 5% per annum.
(a) What is the price of this bond?
(b) What is its promised rate of return?
(c) Decompose the bond’s quoted rate of return into its components.