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There are two types of agents in the economy - Type A believe that the appropriate market portfolio pA to hold according to CAPM is
There are two types of agents in the economy - Type A believe that the appropriate market portfolio pA to hold according to CAPM is such that E(rPA)=12%,PA=2%, and type B believe that it is pB where E(rPB)=18%,PA=10%. However, the market price of risk according to these two types is the same. What is the risk-free rate in the economy? [10 pts.]
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