Answer the following questions You may use excel for flurried. problems. Anazh Ne spreadsheet/output
1. CapMI Asset Pricing Model (CAPM) a Show graphically how Iwo-hind separation occurs under CAPM D Show and description. how investors mmze Milly under this framework. Describe which assets ere included in the “maMer portfolio and how Is it weigh.?
2. Securities Market Line (SML) • Show and explain how the smuMes market line plots the relationship between flak and return. L Explain how a security may be ‘undervalued” al—overvalued” based on the SML c. Explain the contempt of “alpha”. Show alpha graphically on the SML. 3 ErilpInCal tests ohla CAPM • When empirically testing an asset pricing model such as the CAPM. what is meant when it is said that such an analysis is a Mual rest’? b. Exp., some of the cliques of Roll end Others that have been made against the CAPM c. Do you think that the CAPM should still be used in practice when assessing an assers risMretum? Why?
0 Asset Micing Models a. What Is Atilrage Pricing Theory (APT)? D How is APT different from the CAPM? If we conclude Met the market Is inefficient Ito varying degrees). are asset pricing models still useful? Explain.
