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Assume a fictitious world where there are four stocks : General Electric (GE) CitiGroup ( C) British petroleum ( BP) Facebook (FB) The market is
Assume a fictitious world where there are four stocks : General Electric (GE) CitiGroup ( C) British petroleum ( BP) Facebook (FB) The market is in equilibrium where CAPM assumptions hold( e.g homogeneous expectations markets, zero transaction costs, etc) Express the equilibrium condition for this universe of stock in terms of each stock's return contribution and risk contribution. For notation purposes, you can use the symbols rmkt & Qmkt to represent the market's return risk and Ed to represent the risk-free rate. ( Bote: students can either type or neatly hand-write the relationship and upload a picture or file containing the expression.)
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