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Hi and welcome to this calculation exercise. Today we will solve a system of equations using CAPM. So prior to watching this video, I recommend you to see portfolio theory 4 as well as a math video on system of equations. Now please pause the video and read the question. Hi and welcome back. Now were trying to find the expected return of market and the risk free rate of return by using CAPM and two assets that you already have. We have SAS and we have Axfood and this year is given and we also know the standard CAPM formula that you have in your formula sheet. I would start by defining what is called risk premium. We call it Rp which is basically the excess return over the risk free rate. And using this instead. and inserting the numbers we already know, we can write up two equations. So we have the expected return of SAS, which is. 9% should according to CAPM, be the risk free rate of return plus beta, which is 1.4 times the risk premium. Furthermore, we also know the expected return