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Read the following statements: The indifference curves of an investor who is risk seeking are upward sloping in (risk,expected return)-space. Suppose the market risk premium
Read the following statements:
- The indifference curves of an investor who is risk seeking are upward sloping in (risk,expected return)-space.
- Suppose the market risk premium is 15% and the risk-free rate is 5%. The beta of asset A is 0.2. Under the CAPM, the expected return of A is 8%.
- U.S. Treasury-Bills are a good proxy of the risk-free rate because they yield a fixed real return, and bear no default risk.
Select all answers that apply (more than one may be correct, or none may be correct).
A. | Statement 1 is true. | |
B. | Statement 2 is true. | |
C. | Statement 3 is true. | |
D. | None of the statements are true. |
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