Question: Problem Bonus 0.5. An asset with price P has random payoff X. CAPM says that E[R-R] = COV (R,RM) (E[RM]- Rf) Var(RM) where R=

Problem Bonus 0.5. An asset with price P has random payoff X. CAPM says that E[R-R] = COV (R,RM) (E[RM]- Rf) Var(RM) where R= -1. Show that this implies the following: 1 P 1+R, [E[X] Cov (X, RM) (E[RM] R)] where P is the price of an asset with random payoff X. Var (RM)

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