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1. Pick 4 stocks and create a portfolio. Discuss how and why the combination will reduce...

1. Pick 4 stocks and create a portfolio. Discuss how and why the combination will reduce portfolio risk compared to holding these stocks individually and separately. What would be the portfolio’s beta? (You can find stock’s beta on each stock’s homepage at http://finance.yahoo.com (Links to an external site.)Links to an external site.) Is your portfolio still subject to market risk? And why?

2. Discuss and comment on CAPM(Capital Asset Pricing Model). Give an example of it.

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