Question $4($Mandatory$)(1$ point$)$

Asset A has an expected return of $7\mathrm{.}80\%$ with $20\%$ volatility. Asset $B$ has a higher expected return of $8\mathrm{.}40\%$ with $15\%$ volatility. Which of the following statements is correct?

The data is inconsistent with the CAPM that posits a positive relationship between expected returns and risk: higher expected returns should be associated with higher risk, not lower risk.

The data does not necessarily contradict the CAPM because the relevant measure of the risk of an asset, according to the CAPM is beta not volatility.

The data is consistent with the CAPM only if investors display a favorable attitude towards risk.

The data is inconsistent with the CAPM because the ratio of expected returns $(7\mathrm{.}80\frac{\%}{8\mathrm{.}40}\%)$ is different from the ratio of their corresponding volatilities $(20\frac{\%}{15}\%)$