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Suppose you hold an asset that delivers a return . You wish to hedge against a decline in the price of this asset using a
Suppose you hold an asset that delivers a return . You wish to hedge against a decline in the price of this asset using a risk-free asset with return and a market index with return . Using the CAPM, explain how you would allocate money between the risk-free asset and the market index so as to minimize your portfolio variance.
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