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From the market prices, we know the following two premiums: E(rM ) E(rA) = 0.4 and E(rA) rf = 0.1. Suppose that asset A is
From the market prices, we know the following two premiums: E(rM ) E(rA) = 0.4 and E(rA) rf = 0.1. Suppose that asset A is fairly priced according to CAPM.
(a) Calculate A.
(b) If security B has B = 1 and the market prices imply that E(rB) rf = 0.5. What is B?
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