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Mean-Variance Optimization and the CAPM

Mean-Variance Optimization and the CAPM

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Exercise 3 Without using (5) show that the e cient frontier is indeed a straight line as described above. Hint: consider forming a portfolio of the risk-free security with any risky security or risky portfolio. Show that the mean and standard deviation of the portfolio varies linearly with where is the weight on the risk-free-security.

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