# Question

If the simple CAPM is valid, which of the following situations are possible? Explain. Consider each situation independently.

## Answer to relevant Questions

If the simple CAPM is valid, which of the following situations are possible? Explain. Consider each situation independently. Two investment advisors are comparing performance. One averaged a 19 percent rate of return and the other a 16 percent rate of return. However, the beta of the first investor was 1.5, whereas that of the second was 1. a. ...Consider the two (excess return) index model regression results for stocks A and B: RA = .01 + 1.2RM R- squared = .576 σ ( e) = 10.3% RB = - .02 + .8RM R- squared = .436 σ(e) = 9.1% a. Which stock has more firm- ...Use the data in Table 10.4 to compute a five- day moving average for Computers, Inc. Can you identify any buy or sell signals? Continue to use the data in the preceding problem. Suppose that you want to construct a two- year-maturity forward loan commencing in three years. a. Suppose that you buy today one three- year- maturity zero- coupon bond. ...Post your question

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