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Q5. According to CAPM beta is the only relevant measure of risk, yet the Capital Market Line is used to derive the Security Market line.
Q5. According to CAPM beta is the only relevant measure of risk, yet the Capital Market Line is used to derive the Security Market line. Explain these concepts with diagrams and equations. The return and beta of two stocks that lie on the security market line are as follows. ABC has return of 18% and beta 1.2 and XYZ has return 14% and beta 0.8. What is the required return on PQR with beta of 1.4? What will happen if expected return is lower than required return? Q5. According to CAPM beta is the only relevant measure of risk, yet the Capital Market Line is used to derive the Security Market line. Explain these concepts with diagrams and equations. The return and beta of two stocks that lie on the security market line are as follows. ABC has return of 18% and beta 1.2 and XYZ has return 14% and beta 0.8. What is the required return on PQR with beta of 1.4? What will happen if expected return is lower than required return
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