Problem

Assume that both X and Y are well-diversified portfolios and the risk-free rate is 8%....

Assume that both X and Y are well-diversified portfolios and the risk-free rate is 8%.

In this situation you could conclude that portfolios X and Y:

a. Are in equilibrium.

b. Offer an arbitrage opportunity.

c. Are both underpriced.

d. Are both fairly priced.

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Solutions For Problems in Chapter 7

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