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 (a) (3 marks) Portfolio Expected return Beta A 9% 1.1 B 6% 0.55 Treasury bills 1.5% 0 (b) (3 marks) Portfolio Expected return Beta A 10% 1.5 Market Portfolio 8% 1.0 Treasury bills 2% 0 (c) (3 marks) Portfolio Expected return Standard Deviation A 12% 25% Market Portfolio 9% 21% Treasury bills 2% 0%

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