If the simple CAPM is valid, which of the following situations are possible? Consider each situation separately. a) b) c) d) f) Portfolio A B Portfolio A B Expected Return 20 25 Expected Return 30 40 Portfolio Risk-free 7 Market A Expected Return 16 14 Portfolio Risk-free 10 Market A Expected Return 18 20 Portfolio Risk-free 7 Market 17 A 13 Expected Return Portfolio Risk-free 4 Market A Expected Return 17 13 Beta 1.4 1.2 Standard Deviation 35 25 Standard Deviation 0 30 15 Standard Deviation 0 24 22 Beta 0 1.5 2 Standard Deviation 0 31 16

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Question 2:
If the simple CAPM is valid, which of the following situations are possible? Consider each
situation separately.
a)
b)
c)
d)
f)
Portfolio
A
B
Portfolio
A
B
Expected Return
20
25
Expected Return
30
40
Portfolio
Risk-free 7
Market
A
Portfolio
Risk-free
Market
A
Expected Return
16
14
Portfolio
Risk-free 10
Market
18
A
20
Expected Return
Expected Return
7
17
13
Portfolio
Risk-free 4
Market
A
Expected Return
17
13
Beta
1.4
1.2
Standard Deviation
35
25
Standard Deviation
0
30
15
Standard Deviation
0
24
22
Beta
0
1.5
2
Standard Deviation
0
31
16
Transcribed Image Text:Question 2: If the simple CAPM is valid, which of the following situations are possible? Consider each situation separately. a) b) c) d) f) Portfolio A B Portfolio A B Expected Return 20 25 Expected Return 30 40 Portfolio Risk-free 7 Market A Portfolio Risk-free Market A Expected Return 16 14 Portfolio Risk-free 10 Market 18 A 20 Expected Return Expected Return 7 17 13 Portfolio Risk-free 4 Market A Expected Return 17 13 Beta 1.4 1.2 Standard Deviation 35 25 Standard Deviation 0 30 15 Standard Deviation 0 24 22 Beta 0 1.5 2 Standard Deviation 0 31 16
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