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Question 1 (Total 10 marks) The Capital Market Line (CML) expresses the risk-return trade-off for a portfolio as follows: - E (Rport) = RFR +

Question 1 (Total 10 marks) The Capital Market Line (CML) expresses the risk-return trade-off for a portfolio as follows: - E (Rport) = RFR + Oport [E(RM) RFR OM Required: a. Extend this expression to allow for the evaluation of any individual risky Asset i. Explain the steps in details. (6 marks) b. What are the similarities and differences between the Capital Market Line and Security Market Line as models of the risk-return trade-off? (4 marks) Question 1 (Total 10 marks) The Capital Market Line (CML) expresses the risk-return trade-off for a portfolio as follows: - E (Rport) = RFR + Oport [E(RM) RFR OM Required: a. Extend this expression to allow for the evaluation of any individual risky Asset i. Explain the steps in details. (6 marks) b. What are the similarities and differences between the Capital Market Line and Security Market Line as models of the risk-return trade-off? (4 marks)

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