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3. In an effective stock market, there are two A.B stocks with expected yields of 10 per cent and 20 per cent, respectively. their beta

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3. In an effective stock market, there are two A.B stocks with expected yields of 10 per cent and 20 per cent, respectively. their beta is 0.5 and 1.5 per cent, respectively. Assuming that the CAPM model is correct, answer the following questions. (I) what is the expected rate of return on risk-free interest rates and market portfolio? (2) if the beta of C stock is 1.2, its expected return is 20 per cent. According to the CAPM model, would you choose to buy or sell c shares? If its expected rate of return was 15%, how would you choose? (3) if the standard deviation of the market portfolio is 20%, your risk aversion coefficient is 1.5%. According to portfolio theory, what percentage of the money you will invest in the market portfolio to build your own optimal complete portfolio. What is the expected rate of return and standard deviation for your optimal complete portfolio

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