Question

If the simple CAPM is valid and all portfolios are priced correctly, which of the situations...

If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%.

A)

Portfolio Expected
Return		 Beta
A 16 % 1.1
Market 16 % 1.0


B)

Portfolio Expected
Return		 Standard
Deviation
A 19 % 11 %
Market 14 % 19 %


C)

Portfolio Expected
Return		 Beta
A 19 % 1.1
Market 14 % 1.0


D)

Portfolio Expected
Return		 Beta
A 21.5 % 1.5
Market 16 % 1.0

Multiple Choice

  • Option A

  • Option B

  • Option C

  • Option D

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Answer #1

Correct option is option D

Explanation:-

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