True or False? Explain Suppose the CAPM holds. Suppose an asset A has a lower standard deviation
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Question:
True or False? Explain
- Suppose the CAPM holds. Suppose an asset A has a lower standard deviation than the market portfolio, that is, Then, the expected return on asset A must be lower than the expected return on the market portfolio.
- The CAPM states that returns are based on market risk. Thus, any two assets with the same correlation with the market must have the same risk premium (and thus the same expected return).
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