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1 a) What is systematic and unsystematic risk in the capital asset pricing model (CAPM)? How are they different? Is diversification important to eliminate them?

a) What is systematic and unsystematic risk in the capital asset pricing model (CAPM)? How are they different? Is diversification important to eliminate them?

b) What is the arbitrage pricing theory (APT) and what are its similarities and differences relative to the capital asset pricing model (CAPM)?

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