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1. What are the assumptions that allow the CAPM model to work? 2. Assuming you are buying your first stock, is the stock price based

1. What are the assumptions that allow the CAPM model to work?

2. Assuming you are buying your first stock, is the stock price based on its beta risk, or standard deviation risk, and why?

3. Why may you want to buy a stock that has a higher expected standard deviation and lower expected return than another?

4. How would you calculate beta for Southwest? Why is the R2 important to know?

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