Ratio of the risk premium

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Briefly answer the following questions:

1) Assume CAPM holds. Is the ratio of the risk premium on two risky assets equal to the ratio of their betas? Explain.

2) Suppose a portfolio has a positive investment in every asset, that is, the weight of every asset in the portfolio is greater than zero. Can the expected return on the portfolio be greater than that on every asset in the portfolio? Can it be less than that on every asset in the portfolio? Explain.

Reference no: EM133056014

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