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Capital Asset Pricing Model (CAPM) What is two-fund portfolio separation and why is it important? Show graphically (in return-standard deviation space) how 2-fund separation works
- Capital Asset Pricing Model (CAPM)
- What is two-fund portfolio separation and why is it important?
- Show graphically (in return-standard deviation space) how 2-fund separation works in the context of the CAPM.
- Explain and show how risk averse investors are better off with capital markets.
- What are some of the assumptions that need to hold in order for the CAPM to be applied and why are they important?
- Suppose a stock has a covariance with the market of 0.3 and the market has a variance of 0.2. What is the stocks beta? Is the stock more or less risky than the market?
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Public Finance
Authors: Harvey S Rosen, Ted Gayer
9th International Edition
0071267883, 9780071267885
