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FIN 571 Week 2 DQ 2
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FIN 571 Week 2 DQ 2

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Suppose rf is 5% and rM is 10%. According to the SML and the CAPM, an asset with a beta of −2.0 

has a required return of negative 5% [= 5 − 2(10 − 5)]. Can this be possible? Does this mean that 

the asset has negative risk? Why would anyone ever invest in an asset that has an expected and

required return that is negative? Explain

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