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Consider an oil drilling venture. The price of a share of this venture is $800. It is expected to yield the equivalent of $900 after
Consider an oil drilling venture. The price of a share of this venture is $800. It is expected to yield the equivalent of $900 after 1 year, but due to high uncertainty about how much oil is at the drilling site, the standard deviation of the return is -30%. Currently the risk-free rate is 5%. The expected rate of return on the market portfolio is 10%, and the standard deviation of this rate is 15%. Consider an oil drilling venture. The price of a share of this venture is $800. It is expected to yield the equivalent of $900 after 1 year, but due to high uncertainty about how much oil is at the drilling site, the standard deviation of the return is -30%. Currently the risk-free rate is 5%. The expected rate of return on the market portfolio is 10%, and the standard deviation of this rate is 15%
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