Question: In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on

In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on Apex was r_A = 3.7%. The rate of return on Bpex was only r_B = 3.3%. The market today responded to very encouraging news about the unemployment rate, and r_M = 3.4%. The historical relationship between returns on these stocks and the market portfolio has been estimated from index model regressions as:

Apex: r_A = 0.3% + 1.5r_M

Bpex: r_B = 0.1% + 0.5r_M

a.	What is the predicted returns for Apex & Bpex? (Do not round intermediate calculations. Round your answers to 1 decimal place. Omit the "%" sign in your response.)

	Predicted Returns
Apex	%
Bpex	%

b.	Which company do you think won the lawsuit?

	multiple choice Apex Bpex

rev: 04_20_2016_QC_CS-49537

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