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6. You are considering investing in one of two well-diversified portfolios. Portfolio X has an expected return of 10% and a beta of 1.75 while

6. You are considering investing in one of two well-diversified portfolios. Portfolio X has an expected

return of 10% and a beta of 1.75 while Portfolio Y has an expected return of 8% and a beta of 0.95.

Assuming that you are a rational risk-averse investor and the risk-free rate is 2.50 percent, which of the

two portfolios should you choose and why?

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