Question: QUESTION 6 If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently,

QUESTION 6

If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%.

A)

Portfolio Expected Return Beta
A 14 % 0.6
Market 14 % 1.0

B)

Portfolio Expected Return Standard Deviation
A 17 % 6 %
Market 12 % 14 %

C)

Portfolio Expected Return Beta
A 17 % 0.6
Market 12 % 1.0

D)

Portfolio Expected Return Beta
A 23.0 % 2.0
Market 14 % 1.0

A.

Option A
B.

Option B
C.

Option C
D.

Option D

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