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1.Suppose in a market of many securities, there are two securities, A and B .A has a mean return of 14.4% and a beta to

1.Suppose in a market of many securities, there are two securities, A and B.A has a mean return of 14.4% and a beta to some index of 1.675 while B has a mean return of 7.4% and a beta to the same index of 0.425.

a) What is the mean return of the index? (3 marks)

b) What is the risk free rate? (3 marks)

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