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7. Based on current dividend yields and expected capital gains, the expected rates of retum on port- folios Cand Dare 12% and 16%, respectively. The

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7. Based on current dividend yields and expected capital gains, the expected rates of retum on port- folios Cand Dare 12% and 16%, respectively. The beta of Cis 7, while that of Dis 1.4. The T-bill rate is currently 5%. whereas the expected rate of return of the S&P 500 index is 13%. The standard deviation of portfolio C is 12% annually, that of Dis 31%, and that of the S&P 500 index is 18% a. If you currently hold a market-index portfolio, would you choose to add either of these port- folios to your holdings? Explain. If instead you could invest only in T-bills and one of these portfolios, which would you choose

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