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- 5. Suppose the modeling allows S → ∞0; (a) What is the value of a Call? (b) What is the value of a Put? (c) Explain both answers in terms of finance.A) What does the single index model estimate? B) What is the market risk premium? C) What does Beta show? D) What are all the possible values of Beta and what do they mean?7. Suppose the modeling is that t → T. (a) What is the value of a Call? (b) What is the value of a Put? (c) Explain both answers in terms of finance.
- 3. Suppose the market is wild; it is modeled by o → (a) What is the value of a Call? (b) What is the value of a Put? (c) Explain both answers in terms of finance.Can someone give an example or scenario about the following: 1. Capital Asset Pricing Model2. Market Risk premium3. Risk free rate4. Security market line5. Systematic riskCan someone give an example or scenarios about the following: 1. Efficient portfolio2. Market portfolio3. Efficient frontiers
- The objective function of an investor in a CAPM world is to what (mathematically) [what are your trying to maximize]? What is the major assumption about the distribution of returns that we have to make to get to this objective function?. Suppose interest rates are increasing enough that it can be modeled with r →∞.(a) What is the value of a Call?(b) What is the value of a Put?(c) Explain both answers in terms of finance.What is the Capital Asset Pricing Model (CAPM)? Derive the risk premium when beta is between 0 and 1. Interpret your result.