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Q1 a. what is Sharpe ratio? Show the link between sharpe ratio and best efficient portfolio b. what is capital asset pricing model? Derive the

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a. what is Sharpe ratio? Show the link between sharpe ratio and best efficient portfolio

b. what is capital asset pricing model? Derive the risk premium when beta is between 0 and 1

c. calculate union pacific cost of equity from the CAMP using its own beta (0.90) estimate and the industry beta (1.25) estimate. How different are your answers. Assume a risk free rate of 2% and a market risk premium of 7%. Can you be confident that Unionpacifics true beta is not the industry average?

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