Question: If the simple CAPM is valid which of the following 160534
If the simple CAPM is valid, which of the following situations are possible? Explain. Consider each situationindependently.
Answer to relevant QuestionsIf the simple CAPM is valid, which of the following situations are possible? Explain. Consider each situation independently..:.I am buying a firm with an expected perpetual cash flow of $1,000 but am unsure of its risk. If I think the beta of the firm is .5, when in fact the beta is really 1, how much more will I offer for the firm than it is truly ...a. John Wilson is a portfolio manager at Austin & Associates. For all of his clients, Wilson manages portfolios that lie on the Markowitz efficient frontier. Wilson asks Mary Regan, CFA, a managing director at Austin, to ...When plotting portfolio R relative to the capital market line, portfolio R lies:a. On the CML.b. Below the CML.c. Above the CML.d. Insufficient data given.Assume that both portfolios A and B are well diversified, that E(rA) = 12%, and E(rB) = 9%. If the economy has only one factor, and βA = 1.2, whereas βB = .8, what must be the risk-free rate?
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