You can invest in two assets. One is a risk free asset yielding an interest rate of

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You can invest in two assets. One is a risk free asset yielding an interest rate of rf . The other is an asset with expected return E[r1] and standard deviation σ1. Show that combinations of these two assets map as a straight line in a mean-standard deviation plot.

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Lectures On Corporate Finance

ISBN: 9789812568991

2nd Edition

Authors: Peter L Bossaerts, Bernt Arne Odegaard

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