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5. Answer the following questions regarding the index model. (Index model: Ri Rf = di + Bi(RM Rf) + ei) a. Other things being equal,
5. Answer the following questions regarding the index model. (Index model: Ri Rf = di + Bi(RM Rf) + ei) a. Other things being equal, when the correlation coefficient between the risky asset A and the market portfolio is increased, the price of asset A also increased? Explain briefly. b. What is the correlation coefficient between the risk-free asset and the market portfolio. c. Explain the characteristic differences between the high beta firms (B > 1) and the low beta firms (B 1) and the low beta firms (B
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