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6.60% 17. A stock's abnormal rate of return is defined as the: (a) expected risk-adjusted rate of return minus the market rate of return. (b)

6.60% 17. A stock's abnormal rate of return is defined as the: (a) expected risk-adjusted rate of return minus the market rate of return. (b) the actual rate of return less the expected risk-adjusted rate of return. (c) rate of return during abnormal price movements. (d) the actual rate of return minus the market rate of return. 18. If the simple CAPM is valid and all portfolios are priced correctly, whi of the situations below is possible? Consider each situation independent and assume the risk-free rate is 5%. (a) Portfolio Expected Return A Market 10% 10% Beta 1.4 1.0 Portfolio Expected Return Standard Deviation 13% 14% 2007

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