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3. Are the following true or false? Explain. (LO 7-5) a. Stocks with a beta of zero offer an expected rate of return of zero.

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3. Are the following true or false? Explain. (LO 7-5) a. Stocks with a beta of zero offer an expected rate of return of zero. b. The CAPM implies that investors require a higher return to hold highly volatile securities. 6. You can construct a portfolio with beta of .75 by investing .75 of the investment bud- get in T-bills and the remainder in the market portfolio

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