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In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on
In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on Apex was ra = 3.1%. The rate of return on Bpex was only r 2.5%. The market today responded to very encouraging news about the unemployment rate, and I = 3%. The historical relationship between returns on these stocks and the market portfolio has been estimated from index model regressions as: Apex: ra = 0.3% + 1.6FM Bpex: r = -0.1% + 0.85M a. What is the predicted returns for Apex & Bpex? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Apex Predicted Returns % % Bpex b. Which company do you think won the lawsuit? Apex
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