Question: Please help me to solve this finance question 9. Consider the problem of asset pricing. (a) Derive the Kernel Beta Equation (KBE): E(R) = r

Please help me to solve this finance question

9. Consider the problem of asset pricing. (a) Derive the Kernel Beta Equation (KBE): E(R) = r + Bl (E(RM)-r) using the Basic Pricing Equation (BPE): P = E(mX). (15 points) (b) Under what condition the Kernel Beta Equation can be rewritten as the Market Beta Equation? State also the key economic assumptions behind the Market Risk/Reward Theorem. (15 points) (c) Derive the Security Market Line: E(RI) == + B.(E (RM) -T) What is beta here? Can beta be larger than one? (15 points) (d) Define Sharpe Ratio. Discuss in practice whether investing in stocks or funds with the highest Sharpe Ratio is a good idea. (15 points) i 9. Consider the problem of asset pricing. (a) Derive the Kernel Beta Equation (KBE): E(R) = r + Bl (E(RM)-r) using the Basic Pricing Equation (BPE): P = E(mX). (15 points) (b) Under what condition the Kernel Beta Equation can be rewritten as the Market Beta Equation? State also the key economic assumptions behind the Market Risk/Reward Theorem. (15 points) (c) Derive the Security Market Line: E(RI) == + B.(E (RM) -T) What is beta here? Can beta be larger than one? (15 points) (d) Define Sharpe Ratio. Discuss in practice whether investing in stocks or funds with the highest Sharpe Ratio is a good idea. (15 points)

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