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(b) Consider a world where there are only the following two risky assets: # of shares 70 130 E[r] 14% Volatility 25% 20% Shares Share

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(b) Consider a world where there are only the following two risky assets: # of shares 70 130 E[r] 14% Volatility 25% 20% Shares Share Price 3.5 2.5 11% i. The correlation coefficient between the two shares' returns is-0.3. What is the composition of the market portfolio? What is its expected return and volatility? [5 marks] ii. What are the CAPM betas of the two shares? [5 marks]

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