Question: If the simple CAPM is valid, is the following situation possible? Portfolio 1 Expected Return Standard Deviation A 20% 20% B 12% 32% Risk-free 3%

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

Portfolio 1 Expected Return Standard Deviation

A 20% 20%

B 12% 32%

Risk-free 3% 0%

Portfolio 2 Expected Return Beta

A 18% 1.4

B 16% 1.1

A.

Portfolio 1 is possible, while portfolio 2 is not possible

B.

Neither Portfolio 1 nor Portfolio 2 is possible

C.

Both Portfolio 1 and Portfolio 2 are possible

D.

Portfolio 2 is possible, while portfolio 1 is not possible

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