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Consider the CAPM framework. Suppose that you currently have 40% of your wealth in Treasury Bills, risk-free, and 60% in the four assets below Let
Consider the CAPM framework. Suppose that you currently have 40% of your wealth in Treasury Bills, risk-free, and 60% in the four assets below Let the four assets be traded in a market M with ErM=15% and let the risk-free rate be rf=4%, answer the following questions: a. Find the expected rate of return and the beta of your current portfolio! b. Now, suppose that you want an expected rate of return of 13%, your strategy is to sell some of your holdings of the risk-free assets and use the proceeds to buy the portfolio market. Find beta of the new portfolio? c. Let us assume you want to hold only the risk-free asset and the market portfolio. What weights would give you an expected rate of return of 13% ? What is the beta of this new portfolio
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