Problem 7-17

Consider the following information:

Portfolio	Expected Return	Beta
Risk-free	5	%	0
Market	12.4		1.0
A	10.4		1.7

a.	Calculate the expected return of portfolioAwith a beta of 1.7.(Round your answer to 2 decimal places.)

Expected return

%

b.	What isthe alpha of portfolioA.(Negative value should be indicated by a minus sign.Round your answer to 2 decimal places.)

Alpha

%

c.	If the simple CAPM is valid, state whetherthe above situation is possible?
	Yes No