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The assumptions of caPM Investors evaluate portfolios by looking at the expected returns and standard deviations of the portfolios over a one-period horizon. Investors are never satiated, so when given a choice between two otherwise identical portfolios, they will choose the one with the higher expected return Investors are risk-averse, so when given a choice between two otherwise identical portfolios, they wil choose the one with the lower standard deviationThe Assumptions of CAPM • Investors evaluate portfolios by looking at the expected returns and standard deviations of the portfolios over a one-period horizon. • Investors are never satiated, so when given a choice between two otherwise identical portfolios, they will choose the one with the higher expected return. • Investors are risk-averse, so when given a choice between two otherwise identical portfolios,they will choose the one with the lower standard deviation
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