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2. Assume the CAPM is valid. a. Portfolio A with expected return of 20% and beta of 3; Portfolio B with expected return of 25%

2. Assume the CAPM is valid. a. Portfolio A with expected return of 20% and beta of 3; Portfolio B with expected return of 25% and SD of 4. Is this situation possible? Explain (6 points) b. Assume market portfolio with expected return of 18%; Portfolio A with expected return of 16% and beta of 0.9. Risk free rate = 10%. Is this situation possible under the CAPM? Explain (7 points)

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