According to CAPM, the expected rate of return of a portfolio with a beta of 1.0 and an alpha of 0 is:

a. Between r M and r f .

b. The risk-free rate, r f .

c. ( r M r f ).

d. The expected return on the market, r M .

The following table (for CFA Problems 7 and 8) shows risk and return measures for two portfolios.

Portfolio Average Annual Rate of Return Standard Deviation Beta R 11% 10% 0.5 S&P 500 14% 12% 1.0

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