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5. Capital Asset Pricing Model (CAPM) a. Explain why it is important to assume that investor's already hold the value-weighted market, or tangency, portfolio in

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5. Capital Asset Pricing Model (CAPM) a. Explain why it is important to assume that investor's already hold the value-weighted "market", or tangency, portfolio in order to apply the Capital Asset Pricing Model (CAPM). b. Does the risk-free asset need to exist in order for us to derive the CAPM? If not, how do investors achieve 2-fund separation? (Hint: Your textbook can help with this.)

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