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1. Suppose you have $1000 to invest and are using two stocks (A and B) to construct a market-neutral portfolio. Based on your analysis, the

1. Suppose you have $1000 to invest and are using two stocks (A and B) to construct a market-neutral portfolio. Based on your analysis, the weight for A = 37.4,

  • calculate the weight for B.
  • What do those numbers (the two weights) mean?

2. True or False: risk-free asset should provide a return of 0%. Explain.

3. True or False: As the market portfolio is perfectly diversified, it is risk-free. Explain.

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