1.

List the assumption of capital asset pricing model

Answer»

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Assumptions

  • Aim to maximize economic utilities (Asset quantities are GIVEN and fixed).
  • Are RATIONAL and RISK-averse.
  • Are broadly DIVERSIFIED across a range of investments.
  • Are price takers, i.e., they cannot INFLUENCE prices.
  • Can lend and borrow unlimited amounts under the risk free rate of interest.



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