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Investors will earn high return above the risk-free rate for taking risks. However, since risks affecting individual assets will cancel out in a 1)-specialized/diversified/liquidated/concentrated/set of

Investors will earn high return above the risk-free rate for taking risks. However, since risks affecting individual assets will cancel out in a 1)-specialized/diversified/liquidated/concentrated/set of assets (portfolio), investors are not rewarded for taking such risks. In other words, investors will only be rewarded for taking risks that remain in a portfolio of all assets (market portfolio), which is called the 2).... . The capital asset pricing model (CAPM) assumes that an asset will be priced according to how sensitive the asset's price is to changes in the value of market portfolio, and in the model, the sensitivity coefficient is called the 3)..... . For the non-professional investor, there is a strong case for holding a combination of the risk-free asset and the market portfolio. The proportion of the market portfolio should reflect the risk appetite of the investor. If an investor's is prepared to take more risk than the market portfolio, the investor can achieve this through 4).... .

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