If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%.

A)

PortfolioExpected ReturnBetaA20%1.2Market20%1.0

B)

PortfolioExpected ReturnStandard DeviationA23%12%Market18%20%

C)

PortfolioExpected ReturnBetaA23%1.2Market18%1.0

D)

PortfolioExpected ReturnBetaA30.5%1.7Market20%1.0

Multiple Choice

Option A

Option B

Option C

Option D