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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

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

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