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Unformatted text preview: Risk free rate o Beta on xaxis: Tells us expected return on yaxis o A financial crisis can: Increase the slope of the security market line Increase expected returns Shift the security market line down (decrease expected returns) • CAPM: o Exp. Return on Risky Asset: Risk free rate + beta(exp. Return on market portfolio – risk free rate) Where market portfolio – risk free rate = market risk premium o Portfolio beta: W1B1 + W2B2 + …...
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 Spring '08
 Croce
 Finance, Capital Asset Pricing Model, Corporate Finance, Financial Markets, line graph

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