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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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There are two risky assets, namely Asset 1 and Asset 2, in the economy and only two investors, namely Alice and Bob, who can borrow or lend at the risk-free rate of 2%. The risk-free asset, though, is in a net supply of zero. Alice's initial wealth is $70,000, and Bob's initial wealth is $50,000. Alice has invested $80,000 in Asset 1 and $20,000 in Asset 2. Assume that both Alice and Bob are mean-variance efficient investors, which of the following statements is wrong? Bob has invested $16,000 in Asset 2 The market capitalization of Asset 2 is $24,000 Bob has lent Alice $30,000 The market capitalization of Asset 1 is $80,000
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