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1. Draw the SML and include one asset that is underpriced. 2. Explain how mispricings vanish in equilibrium according to the CAPM. 3. Explain how

1. Draw the SML and include one asset that is underpriced.

2. Explain how mispricings vanish in equilibrium according to the CAPM.

3. Explain how mispricings vanish according to the AP.

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