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Suppose that you know that the following well-diversified portfolios are fairly priced in a two-factor economy where the risk-free rate is 5%. Determine the risk
Suppose that you know that the following well-diversified portfolios are fairly priced in a two-factor economy where the risk-free rate is 5%. Determine the risk premiums associated with each factor and compute the expected market risk premium for the next period based on these figures.
BETA 1 | BETA 2 | E(R) | |
p1 | 1.00 | -.5 | 10% |
p2 | -.5 | 1.5 | 10% |
PLEASE I WANT STEP BY STEP ANSWER REPLY. DONT WRITE DIRECT ANSWERS
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