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Problem 5. A financial firm seeks to be as diversified as possible. As a result, its assets include every risky asset in the economy. It

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Problem 5. A financial firm seeks to be as diversified as possible. As a result, its assets include every risky asset in the economy. It holds these assets in proportion to their market value. The firm is leveraged: its liabilities consist of 20% debt and 80% equity. The marginal tax rate is 40%. What is the market beta of the firm

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