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Suppose that there are n stocks in a market, which satisfies the assumptions and two equi- librium conditions for the Capital Asset Pricing Model (CAPM).

Suppose that there are n stocks in a market, which satisfies the assumptions and two equi- librium conditions for the Capital Asset Pricing Model (CAPM). The market portfolio M is constructed by these n stocks. (a) Derive the capital asset pricing model (or we called the expected return and beta rela- tionship) for an individual asset k in this market, where 1

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