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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?
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Yes
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No
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