A single mispriced asset has a reward to risk ratio of 0.5, while the market has a reward to risk ratio of 2.5. Given t

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answerhappygod
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A single mispriced asset has a reward to risk ratio of 0.5, while the market has a reward to risk ratio of 2.5. Given t

Post by answerhappygod »

A single mispriced asset has a reward to risk ratio of 0.5,
while the market has a reward to risk ratio of 2.5. Given the
asset has a beta β = 2.0, in constructing an optimal allocation
between the mispriced asset and the market, what proportion of your
investment would you place in the mispriced asset?
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