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Solved in 3 steps
- a. What is market value ratio?Please draw the Capital Market Line and the Security Market Line. Please write down their function forms and explain the differences between these two lines.Explain the relationship between JENSEN's alpha and the security marketline of the Capital asset pricing model (CAPM).
- Make a simple example of the following: a. Capital Gain (or Losses) b. Expected Return c. Real Return d. Risk-free Return e. Required Return f. Holding Period Return4) Assume the index model is valid, what inputs will be required to determine covariance between two assets? A) βk B) βL C) σM D) all of the options E) None of the options are correct. Choose the correct answer with justificationIn Capital Asset Pricing Model a) describe the model b) what are the assumptions in the model c) what are weakness does the model have