In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on Apex was ra = 3.1%. The rate of return on Bpex was only rB = 2.5%. The market today responded to very encouraging news about the unemployment rate, and M = 3%. The historical relationship between returns on these stocks and the market portfolio has been estimated from index model regressions as: Apex: A = 0.5% + 1.1rM Bpex: rg = -0.1% + 0.8rM a. What is the predicted returns for Apex & Bpex? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Apex Bpex Predicted Returns % % b. Which company do you think won the lawsuit?

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
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In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision.
The rate of return on Apex was rA = 3.1%. The rate of return on Bpex was only r3 = 2.5%. The market today responded to
very encouraging news about the unemployment rate, and = 3%. The historical relationship between returns on these
stocks and the market portfolio has been estimated from index model regressions as:
Apex: ra
Вpex: r B = -0.1% + 0.8rM
a. What is the predicted returns for Apex & Bpex? (Do not round intermediate calculations. Round your answers to 1
decimal place.)
Apex
Bpex
=
0.5% + 1.1rM
Predicted Returns
%
%
b. Which company do you think won the lawsuit?
Apex
O Bpex
Transcribed Image Text:In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on Apex was rA = 3.1%. The rate of return on Bpex was only r3 = 2.5%. The market today responded to very encouraging news about the unemployment rate, and = 3%. The historical relationship between returns on these stocks and the market portfolio has been estimated from index model regressions as: Apex: ra Вpex: r B = -0.1% + 0.8rM a. What is the predicted returns for Apex & Bpex? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Apex Bpex = 0.5% + 1.1rM Predicted Returns % % b. Which company do you think won the lawsuit? Apex O Bpex
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