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In a particular market, the following assumptions apply: Possibilities Probability of outcome Market returns Yield on securities 1 Yield on securities 2 1 10% 5%
In a particular market, the following assumptions apply:
Possibilities | Probability of outcome | Market returns | Yield on securities 1 | Yield on securities 2 |
1 | 10% | 5% | 14% | 10% |
2 | 30% | 7% | 15% | 8% |
3 | 50% | 10% | 16% | 6% |
4 | 10% | 20% | 23% | 3% |
g) What do the results from the above points indicate regarding risk diversification?
h) Calculate the beta () for securities 1 and 2 based on the stated assumptions.
i) Draw the result for these two properties, if possible.
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