Consider the following information:

Portfolio	Expected Return		Beta
Risk-free	12	%	0
Market	12.6		1.0
A	10.6		0.7

a. Calculate the expected return of portfolio A with a beta of 0.7. (Round your answer to 2 decimal places.)

Expected return ______ %

b. What is the alpha of portfolio A . (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)

Alpha _______%

c. If the simple CAPM is valid, is the above situation possible?

Answer rating: 100% (QA)

a Expected return of A using CAPM riskfree ... View the full answer