Question
In a perfect CAPM world, where all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the
In a perfect CAPM world, where 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. Portfolio A has a standard deviation of 20% and an expected return of 12%, while the market portfolio has a standard deviation of 30% and an expected return of 14%. b. Portfolio A has a Beta of 2 and Portfolio B has a Beta of 3. c. Portfolio A has a beta of 1 and a 15% return, while the market portfolio has a beta of 1 and has an 11% return d. An individual stock has a higher Sharpe Ratio than the Market Portfolio
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