1 answer

If the simple CAPM is valid, is the situation detailed below possible? Explain in a few...

Question:

  1. If the simple CAPM is valid, is the situation detailed below possible? Explain in a few short sentences

Portfolio

Expected Return

Beta

Risk-free

10%

0

Market

16%

1

A

19%

1.5

B

22%

2


Answers

Expected return on A = Risk free rate + Beta*(Market return - Risk free rate)

= 10%+ 1.5*(16%-10%)

=19%

Expected return on B = Risk free rate + Beta*(Market return - Risk free rate)

= 10%+ 2*(16%-10%)

=22%

Hence the situtaion are possible and may be correct.

.

Similar Solved Questions

1 answer
Each of the following planar objects is placed, as shown in Fig. 2.13 (JUST ONE), between...
Each of the following planar objects is placed, as shown in Fig. 2.13 (JUST ONE), between two frictionless circles of radius R. The mass density per unit area of each object is σ, and the radii to the points of contact make an angle θ with the horizontal. For each case, find the horizont...
1 answer
Please help ASAP use the forward and backward difference approximation (FDA & BDA) to evaluate the...
please help ASAP use the forward and backward difference approximation (FDA & BDA) to evaluate the ff partial derivatives (a) fall 1) (6) fyllel) (c) faz(1, 1) (d) fry (1,1) eltag(11) were n=0.5 f(x,y) x 0.5 xolo xolis -0.7 y nos 02 -0.4 yslio y = 1.5 1.3 1.2 6....
1 answer
Use the "Demand Curve” to represent the following cases: 1) The price of the product has...
Use the "Demand Curve” to represent the following cases: 1) The price of the product has changed increase and decreased) 2) The consumer's income has increased and the good is inferior 3) The consumer's income has decreased and the good is normal...
1 answer
QUESTION 4 The following three defense stocks are to be combined into a price-weighted stock index in January 2016 (per...
QUESTION 4 The following three defense stocks are to be combined into a price-weighted stock index in January 2016 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance): Suppose that Douglas McDonnell shareholders approve a 3-for-1 stock split on...
1 answer
I'm assuming my fantastic instructor wants us to solve for I1, Ic, and Ib. Either way,...
I'm assuming my fantastic instructor wants us to solve for I1, Ic, and Ib. Either way, your guess is probably better than mine. Updated: No supply voltage given by professor so most classmates just picked a voltage. LEnMS . We were unable to transcribe this image...
1 answer
When binary fission occurs, name the type of nucleic acid much information is copied. of nucleic...
When binary fission occurs, name the type of nucleic acid much information is copied. of nucleic acid involved and how What is the difference between binary fission and protein synthesis: What is meant by "complementarity of bases? What are nucleotide bases? Name the nucleotide bases associated ...
1 answer
§ (23+1 – 2) 5. i=0
§ (23+1 – 2) 5. i=0...
1 answer
Cloche's Hats had sales for the year of $684,700 and cost of goods sold equal to...
Cloche's Hats had sales for the year of $684,700 and cost of goods sold equal to 62 percent of sales. The inventory at the beginning of the year was $123,100 and the end-of-year inventory was $139,200. What was the company's inventory period? Assume 365 days in a year. Multiple Choice eBook ...
1 answer
A company that manufactures air-operated drain valve assemblies currently has $120,000 available to pay for plastic...
A company that manufactures air-operated drain valve assemblies currently has $120,000 available to pay for plastic components over a 5-year period. If the company spent only $56,000 in year 1, what uniform annual amount can the company spend in each of the next 4 years to deplete the entire budget?...
1 answer
Explain how annuity distributions are taxed.
Explain how annuity distributions are taxed....
1 answer
Please help? Construct the shear force and bending moment diagrams for the beam shown by the...
Please help? Construct the shear force and bending moment diagrams for the beam shown by the area method. Neglect the weight of the beam. 200 lb/ft Hinge 2 ft FIG. P4.41...
1 answer
On 9/1/18, signed a note payable of $5,000, with interest rate of 6%. Interest only payment...
On 9/1/18, signed a note payable of $5,000, with interest rate of 6%. Interest only payment is due on 12/31. FYE is 10/31. On 9/1/18, signed a note payable of $5,000, with interest rate of 6%. Interest only payment is due on 12/31. FYE is 10/31. Date 9/1/18 10/31/18 12/31/18...
1 answer
Write a CARE PLAN - on patient with cellulitis in bil lower extremities , sleep apnea,...
Write a CARE PLAN - on patient with cellulitis in bil lower extremities , sleep apnea, and lymphedema. Pt. demographics ----- Pt. is always in bed , has bil lower limb stage 4 ulcers, has a Pacemaker, syncope, and oxygen cannula.Pt. Verbal and alert&orientedx4. Pt. vitals - temp.- 96.8*F , pulse...
1 answer
Which is a possible example of species that can comprise a buffer solution?
Which is a possible example of species that can comprise a buffer solution?...
1 answer
1. What impact would an increase in AD, in the vertical range of AS, will have...
1. What impact would an increase in AD, in the vertical range of AS, will have on GDP and the price level according to the AD/AS model? Explain the reasons to score high marks. Ans: IF...
1 answer
How do you FOIL #(x-10)(x+10)#?
How do you FOIL #(x-10)(x+10)#?...
1 answer
1 2 Environmental Concerns Limited (ECL) issued $500,000 of 10 year, 6.5% bonds payable at par...
1 2 Environmental Concerns Limited (ECL) issued $500,000 of 10 year, 6.5% bonds payable at par value on May 1, 2018. The bonds pay interest each April 30 and October 31, and the company ends its accounting year on December 31. Requirements: 1. Fill in the blanks: a. ECL's bonds are priced at ...
1 answer
Webvan and Tesco were both in the online grocery business. Webvan failed largely because Select one: a. It was not solving a real problem for a large-enough customer segment b. It targeted an attracti...
Webvan and Tesco were both in the online grocery business. Webvan failed largely because Select one: a. It was not solving a real problem for a large-enough customer segment b. It targeted an attractive market but unattractive industry while adding fixed costs to a low-margin business model c. The t...