Consider two well-diversified portfolios. Portfolio 1 has an expected return of 8% and three-quarters average market risk while portfolio 2 has an expected return of 12% and a beta of 1.50. If the risk-free rate is 2.5%, which portfolio would a rational risk- averse investor prefer and why?
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Consider two well-diversified portfolios. Portfolio 1 has an expected return of 8% and three-quarter...
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