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Unformatted text preview: 2. The expected market risk premium is E(R MR f ) = 9%. The variance of the market is 0.0484. Assume that the CAPM holds. Suppose that an efficient portfolio P has a standard deviation σ P = 30%, and a correlation with the market portfolio of 0.55. Compute the beta and the expected risk premium of portfolio P. 3. Assume that the CAPM holds. a) Is this situation possible under the CAPM: b) Is this situation possible under the CAPM:...
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 Spring '09
 Clarke
 Standard Deviation, Variance, Capital Asset Pricing Model, Financial Markets, Probability theory, Modern portfolio theory

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