Question
Consider the following information: Portfolio Expected Return Standard Deviation Risk-free 10 % 0 Market 18 1.0 A 16 1.5 a. Calculate the return predicted by
Consider the following information:
| Portfolio | Expected Return | Standard Deviation | |
| Risk-free | 10 | % | 0 |
| Market | 18 | 1.0 | |
| A | 16 | 1.5 | |
a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.5.
b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign.)
c. If the simple CAPM is valid, is the situation above possible?
-
Yes
-
No
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International Finance
Authors: Maurice D Levi
5th Edition
0415774594, 9780415774598
