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Consider the following information: Portfolio Risk-free Market A Expected Return 7% 12.2 11.0 Beta 0 1.0 1.6 a. Calculate the return predicted by CAPM for

Consider the following information: Portfolio Risk-free Market A Expected Return 7% 12.2 11.0 Beta 0 1.0 1.6 a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.6. (Round your answer to 2 decimal places.) Return % b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Alpha % c. If the simple CAPM is valid, is the situation above possible? Yes No

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