Question: E(ri) = rf + (E(rm) rf) O OM Here is the CAPM and defines the expected return of an asset , the expected return of

E(ri) = rf + (E(rm) rf) O OM Here is the

E(ri) = rf + (E(rm) rf) O OM Here is the CAPM and defines the expected return of an asset , the expected return of asset is E(ri), a function of the risk-free rate, rf, the expected return of market portfolio, E(rm), and have ratio OM m = Bi ( O im= the covariance of returns of the asset with the market FM portfolio ; 0M = the variance of returns of the market portfolio) Assume now we have a portfolio P, where an amount wi is invested in a risky asset i, and wm=(1 w;) in the market portfolio and derive the equation above (CAPM). Please present all steps

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