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Question 13 a) Describe the distinction between Capital Allocation line and Security Market Line. Which line is used to find Sharpe Ratios? b) Draw capital
Question 13 a) Describe the distinction between Capital Allocation line and Security Market Line. Which line is used to find Sharpe Ratios? b) Draw capital allocation and sketch an efficient frontier. c) How do you identify the tangency portfolio (most efficient risky portfolio) from the capital allocation line? question 14 Describe the distinction between systematic risk and Nonsystematic risk with clear example. Describe the usefulness of the CAPM model. Like DDM model of stock valuation, the CAPM can be used to understand whether certain assets are undervalued or overvalued. Discuss
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