Question: If the simple CAPM is valid, is the following situation possible? Portfolio 1 Expected Return Standard Deviation A 18% 22% B 15% 25% Risk-free 3%

If the simple CAPM is valid, is the following situation possible?

Portfolio 1 Expected Return Standard Deviation

A 18% 22%

B 15% 25%

Risk-free 3% 0

Portfolio 2 Expected Return Beta

A 20% 1.2

B 16% 1.4

A.

Portfolio 2 is possible, while portfolio 1 is not possible.
B.

Both Portfolio 1 and Portfolio 2 are possible.
C.

Portfolio 1 is possible, while portfolio 2 is not possible.
D.

Neither Portfolio 1 nor Portfolio 2 is possible.

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