What would be the rate of return on a security investment with a standard deviation of 5%,and the risk free rate of interest is 4%, with a price of total risk at 0.5?

What is the formula for this?

To calculate the rate of return on a security investment, we can use the Capital Asset Pricing Model (CAPM) formula. The CAPM formula is:

Rate of Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)

In this formula, the Risk-Free Rate refers to the risk-free rate of interest, which is given as 4% in this case. Beta is a measure of the security's volatility or systematic risk relative to the market. However, the question does not provide the value of beta, so we cannot calculate the rate of return using the CAPM formula without that information.

Given the price of total risk at 0.5, it may refer to the market risk premium. The market risk premium is the additional return expected from investing in the market above the risk-free rate. However, it does not directly contribute to calculating the rate of return using the CAPM formula.

In summary, without the value of beta or additional information, we cannot determine the rate of return using the CAPM formula.