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Part II. Short answers-theory (9 points) 1. In the M&M world without corporate and personal taxes, will replacing a security that has a high required

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Part II. Short answers-theory (9 points) 1. In the M&M world without corporate and personal taxes, will replacing a security that has a high required rate of return (equity) with one that requires a lower return (debt) lower the average cost of capital? (3 points) 2. Is it possible to increase return and decrease risk of a portfolio at the same time? (3 points) 3. What is the most plausible explanation for the relationship between risk and return? (3 points)

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