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Question One Sketch the capital market line and the efficient frontier when borrowing and lending rates are equal. Label the axes and important points of

Question One

  1. Sketch the capital market line and the efficient frontier when borrowing and lending rates are equal. Label the axes and important points of your sketch.
  2. Do the same for the Security Market Line
  3. Would you expect firms with high operating leverage to have higher betas? Explain!

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