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

n 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 rA

= 3.1 % .

The rate of return on Bpex was only rB

= 2.5 % .

The market today responded to very encouraging news about the unemployment rate, and rM

= 3 % .

The historical relationship between returns on these stocks and the market portfolio has been estimated from index model regressions as:

Apex: rA

= 0.2 % + 1.4

Bpex: rB

= 0.1 % + 0.6

Required:

What is the predicted returns for Apex & Bpex?

Which company do you think won the lawsuit?

n a recent closely contested lawsuit, Apex sued Bpex for patent

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