Question

In: Finance

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 are possible? Consider each situation independently and assume the risk free rate is 5%:     

Option (A)

Portfolio

Expected Return

Beta

Portfolio A

18.0%

1.2

Market Portfolio

18.0%

1.2

Option (B)

Portfolio

Expected Return

Beta

Portfolio A

17.5%

2.5

Market Portfolio

10.0%

1.0

Option (C)

Portfolio

Expected Return

Beta

Portfolio A

27.0%

1.0

Market Portfolio

15.0%

1.0

Option (D)

Portfolio

Expected Return

Standard Deviation

Portfolio A

20.0%

0.12

Market Portfolio

15.0%

0.10

Option (E)

Portfolio

Expected Return

Beta

Portfolio A

18.0%

1.2

Market Portfolio

18.0%

1.0

     A)    Option A.

     B)    Option B.

     C)    Option C.

     D)    Option D.

     E)    Option E.

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

CORRECT ANSWER : OPTION B

jeff jeffy answered 2 weeks ago
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