3. Recall the CAPM formula in a market with N assets: Cov(RM,Ri AwM, RM is the return of the market portfolio, M is its expected value and , its where 2-Co (H variance. We want to extend the formula to a portfolio of the N assets with proportion vector given by = (T1,T2, . . . ,TN). (a) (3 points) Define the beta factor of the portfolio by Pn = Cov (RyR1) Prove that i=1 where A, i = 1, 2, . . . , M, are the betas of the risky assets. b) (3 points) Conclude the following extension 3. Recall the CAPM formula in a market with N assets: Cov(RM,Ri AwM, RM is the return of the market portfolio, M is its expected value and , its where 2-Co (H variance. We want to extend the formula to a portfolio of the N assets with proportion vector given by = (T1,T2, . . . ,TN). (a) (3 points) Define the beta factor of the portfolio by Pn = Cov (RyR1) Prove that i=1 where A, i = 1, 2, . . . , M, are the betas of the risky assets. b) (3 points) Conclude the following extension