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please solve this question 100% true I need in next 3 hours please do step by step all steps thank you 1. Consider a market
please solve this question 100% true I need in next 3 hours please do step by step all steps thank you
1. Consider a market in which the Capital Asset Pricing Model (CAPM) holds. There are two assets with the following attributes.: The market capitalisation of Asset 1 is 40,000 and the market capitalisation of Asset 2 is 60,000 . The market portfolio is defined by the market capitalisations. (a) Show that the market portfolio has unit beta. [5 marks] (b) Calculate the betas of Asset 1 and Asset 2. [8 marks] (c) Determine the value of the risk-free rate of interest which is consistent with the results obtained in part (c), under the assumption that the CAPM holds. [7 marks] (d) Determine the market price of risk. [5 marks] (c) For Z=X1aX2bX3, is it possible to set the value of a and b such that Z is independent with X1 conditional on X3=x3 (i.e., ZX1X3=x3 ), for any fixed value x3R ? In other word, we hope to make X1 and Z independent conditional on that X3 equals to a fixed number x3, regardless what the value of x3 is. If this can be done, give an example of (a,b) that satisfy the condition. 1. Consider a market in which the Capital Asset Pricing Model (CAPM) holds. There are two assets with the following attributes.: The market capitalisation of Asset 1 is 40,000 and the market capitalisation of Asset 2 is 60,000 . The market portfolio is defined by the market capitalisations. (a) Show that the market portfolio has unit beta. [5 marks] (b) Calculate the betas of Asset 1 and Asset 2. [8 marks] (c) Determine the value of the risk-free rate of interest which is consistent with the results obtained in part (c), under the assumption that the CAPM holds. [7 marks] (d) Determine the market price of risk. [5 marks] (c) For Z=X1aX2bX3, is it possible to set the value of a and b such that Z is independent with X1 conditional on X3=x3 (i.e., ZX1X3=x3 ), for any fixed value x3R ? In other word, we hope to make X1 and Z independent conditional on that X3 equals to a fixed number x3, regardless what the value of x3 is. If this can be done, give an example of (a,b) that satisfy the conditionStep by Step Solution
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