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 = 3.1%. The rate of return on Bpex was only r_B = 2.5%. The market today responded to very encouraging news about the unemployment rate, and r_M = 3%. The historical relationship between returns on these stocks and the market portfolio has been estimated from index model regressions as: Apex: r_A = 0.5% + 1.1r_M Bpex: r_B = 0.1% + 0.8r_M a. What is the predicted returns for Apex & Bpex? (Do not round intermediate calculations. Round your answers to 1 decimal place.)

b. Which company do you think won the lawsuit?

multiple choice

Apex
Bpex

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