Determine expected and required return

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Reference no: EM1345753

Suppose Rf is 5% and Rm is 10%. According to the SML and the CAPM, an asset with a beta of -2.0 has a required return of negative 5% [= 5 - 2(10 - 5)]. Can this be possible? Does this mean that the asset has negative risk? Can you explain why anyone would ever invest in an asset that has an expected and required return that is negative?

Reference no: EM1345753

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