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Briefly explain how the Capital Asset Pricing Model is used to derive an expected return of an asset/portfolio....referencing the difference between diversifiable and non-diversifiable risk
Briefly explain how the Capital Asset Pricing Model is used to derive an expected return of an asset/portfolio....referencing the difference between diversifiable and non-diversifiable risk relative to the amount of securities one would add to a portfolio. Also, explain how one would arrive at Beta, its significance, and why we assume that it captures all market/systematic risk. How and why is the SML used to represent the expected return of an asset or portfolio
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