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Answer parts (a)-(d) based on the followings: (a) Based on the Capital Asset Pricing Model (CAPM), if the expected market return is 7% and the
Answer parts (a)-(d) based on the followings: (a) Based on the Capital Asset Pricing Model (CAPM), if the expected market return is 7\% and the risk-free rate is 2%, what is the expected return for Security 1 ? (b) Using the CAPM, if expected return for Security 2 is 8.5% and the risk-free rate is 2%, what is the expected return for the market? (c) Based on the CAPM, which security has the highest expected return and why? (d) Based on the CAPM, if there is a decline in the expected market return, which security will have the greatest impact on the expected return and why
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