If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Each option below has $2$ portfolios with different returns and betas. Consider each situation independently, and assume the risk$-$free rate is $5\%.$

Portfolio

Portfolio$$s Expected Return

Portfolio$$s Beta

Option A

$15$

$1\mathrm{.}2$

$15$

$1\mathrm{.}0$

Option B

$20$

$1\mathrm{.}2$

$15$

$2\mathrm{.}0$

Option C

$20$

$1\mathrm{.}2$

$15$

$1\mathrm{.}0$

Option D

$30$

$2\mathrm{.}5$

$15$

$1\mathrm{.}0$

Question $16$Answer

a$.$

Option B

b$.$

Option C

c$.$

Option A

d$.$

CAPM does not hold for all the options

e$.$

Option D