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The beta coefficient of an asset can be expressed as a


The beta coefficient of an asset can be expressed as a function of the asset's correlation with the market as follows:

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a. Substitute this expression for beta into the Security Market Line (SML), Equation 5-9. This results in an alternative form of the SML.

b. Compare your answer to part a with the Capital Market Line (CML), Equation 5-6 what similarities are observed? What conclusions can be drawn?

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Finance Basics: The beta coefficient of an asset can be expressed as a
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