Consider the following information:

Portfolio	Expected Return		Beta
Risk-free	10	%	0
Market	18		1.0
A	16		1.5

a.	Calculate the expected return of portfolio A with a beta of 1.5.

Expected return

%

b.	What is the alpha of portfolio A. (Negative value should be indicated by a minus sign.)

Alpha

%

c.

If the simple CAPM is valid, state whether the above situation is possible?

	Yes
	No