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

Homework Answers

Answer #1

Correct option is option D

Explanation:-

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