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Consider the following information: Portfolio Expected Return Beta Risk-free 7 % 0 Market 12.8 1.0 A 11.5 1.9 a. Calculate the return predicted by CAPM

Consider the following information:

Portfolio Expected Return Beta
Risk-free 7 % 0
Market 12.8 1.0
A 11.5 1.9

a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.9. (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?

  • Yes

  • No

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