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The Capital asset pricing model (CAPM) shows that the required rate of return on a given security is related to the level of expected or

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The Capital asset pricing model (CAPM) shows that the required rate of return on a given security is related to the level of expected or required rate of return on the market portfolio (such as returns on SP 500 or DJ 30 industrial). How the relationship between the assets return and the market returns can be estimated by the following regression? Y, = a + BX, +8. Also give the assumptions involved in the above regression model. (14)

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