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You are considering an investment GDL, Inc. GDL has a Beta = 0.80. The goddess tells you that GDL will have a return of

You are considering an investment GDL, Inc. GDL has a Beta = 0.80. The goddess tells you that GDL will have a

You are considering an investment GDL, Inc. GDL has a Beta = 0.80. The goddess tells you that GDL will have a return of 13% over the next year, and she also reveals that rm = 15% and r: = 3%. (a)Show the weights necessary to form a portfolio using the market asset and the risk free asset that has the same expected return as GDL. Clearly explain why the portfolio is or is not better investment than GDL. (b) Show the weights necessary to form a portfolio using the market asset and the risk free asset that has the same risk as GDL. Clearly explain why the portfolio is or is not better investment than GDL.

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To determine the weights necessary to form a portfolio with the same expected return as GDL we can use the Capital Asset Pricing Model CAPM According ... blur-text-image

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