Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Consider the following information: Portfolio Expected Return Beta Risk-free 7% 0 Market 11.0 1.0 A 10.0 1.8 a. Calculate the return predicted by CAPM for
Consider the following information:
| Portfolio | Expected Return | Beta |
|---|---|---|
| Risk-free | 7% | 0 |
| Market | 11.0 | 1.0 |
| A | 10.0 | 1.8 |
a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.8. (Round your answer to 2 decimal places.)
b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
c. If the simple CAPM is valid, is the situation above possible?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started