Consider the following information: Expected Return Beta Risk Free 7% 0 Market 12.2 1.0 A 11.0 1.6
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Question:
Consider the following information:
Expected Return Beta
Risk Free 7% 0
Market 12.2 1.0
A 11.0 1.6
a.Calculate the return predicted by CAPM for a portfolio with a beta of 1.6.(Round your answer to 2 decimal places.)
b.What isthe alpha of portfolioA.(Negative value should be indicated by a minus sign.Round your answer to 2 decimal places.)
c.If the simple CAPM is valid, is the situation above possible?
Yes or No?
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