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What are the crucial assumptions that underlie the Two-Fund separation result upon which the CAPM is based? (Note: Two-Fund separation is the result that all
What are the crucial assumptions that underlie the Two-Fund separation result upon which the CAPM is based? (Note: Two-Fund separation is the result that all investors find it optimal to form portfolios containing only the market portfolio and the risk- free asset). Give some indications of how Two-Fund separation would break down if the assumptions were violated
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