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Here are some characteristics of two portfolios, the market index, and the risk-free asset. Portfolio A Portfolio B Market index T-bills Expected Return 11% 14%

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Here are some characteristics of two portfolios, the market index, and the risk-free asset. Portfolio A Portfolio B Market index T-bills Expected Return 11% 14% 12% 6% Beta 0.8 1.5 1 0 Standard Deviation 10% 31% 20% 0% Required: a-1. Calculate the return predicted by CAPM for a portfolio with a beta of 0.8. (Round your answer to 1 decimal place.) Return % a-2. Calculate the return predicted by CAPM for a portfolio with a beta of 1.5. Return % b. If instead you could invest only in bills and one of these portfolios, which would you choose? Portfolio A Portfolio B

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