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- A) What does the single index model estimate? B) What is the market risk premium? C) What does Beta show? D) What are all the possible values of Beta and what do they mean?Please do a and b separate (Question 2) a) Plot the Security Market Line (SML)b) Superimpose the CAPM’s required return on the SMLc) Indicate which investments will plot on, above and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what doesit show? Identify undervalued/overvalued investments from the graph.choose which one ? 3.Assume CAPM holds. What is the correlation between an efficient portfolio and the market portfolio?a.1b.-1c.0d.Not enough information
- 2. What are the two types of fixed-income portfolio management strategies and why is each used?which one is correct? QUESTION 6 Given a portfolio of stocks, the envelope curve containing the set of best possible combinations is known as the a. efficient frontier. b. utility curve. c. last frontier. d. efficient portfolio. e. capital asset pricing model.vuunyiuunu assumption of "y. Q2. How portfolio return and risk is calculated? Explain the role of correlation among asset in portfolio? Why this correlation is important?
- d) “The Sharpe ratio is used when the portfolio represents the entire investment fund, while the Treynor ratio is used when the portfolio represents the active portfolio to be optimally mixed with the passive portfolio". True or false? Explain.If a portfolio has a positive investment in every asset, can the beta of the portfolio be less than the sum of the individual asset's betas in the portfolio?Plot the Security Market Line (SML) b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML? d) If an investment’s expected return (mean return) does not plot on the SML, what doesit show? Identify undervalued/overvalued investments from the graph (
- (4) What is a replicating portfolio? What isarbitrage?if asset A has lower volatility than asset B, then it contributes less to the overall volatility when added to a portfolio. True or false?Indicate which investments will plot on, above and below the SML? If an investment’s expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph.