Question
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?
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The New Public Finance
Authors: Inge Kaul, Pedro Condeicao
1st Edition
0195179978, 978-0195179972
