Please show all equations and work as needed.
According to A:
18%=8%+1*market risk premium
=>market risk premium=10%
So, B's return should be=8%+0.5*10%=13%
But as B's return is 12%, so B is overvalued
Short sell B and buy/long A
Please show all equations and work as needed. Assume that A and B are two well-diversified portfolios and that the risk-free rate is 8%. PortfolioExpected Returm 1.00 18% 12% 0.50 In this situation,...
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