Agree or Disagree? and Explain why:
A. Two firms have the same asset beta (Ba) and a tax rate but different equity Betas. The firm with the higher equity beta must employ more financial leverage.
B. The "feasible set" and "efficient set" differ because the feasible set consists of all possible portfolios of assets, whereas the efficient set includes only the portfolios which maximize expected return for any given level of volatility (assume the risk-free rate does not exist).