Question: Question 1 (9 marks) If the simple CAPM is valid, which of the three situations below are possible? Please explain briefly. Consider each situation independently.

Question 1 (9 marks) If the simple CAPM is valid, which of the three situations below are possible? Please explain briefly. Consider each situation independently. Required Beta (3 marks) Portfolio A B Treasury bills Expected return 9% 0.55 0 1.5% (b) (3 marks) Portfolio A Market Portfolio Treasury bills Expected return 10% 8% 2% Beta 1.5 1.0 0 (e) (3 marks) Portfolio A Market Portfolio Treasury bills Expected return 12% 9% 2% Standard Deviation 25% 21% 0%

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