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n a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on

n 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 rB =2.5%. The market today responded to very encouraging news about the unemployment rate, and rM =3%. The historical relationship between returns on these stocks and the market portfolio has been estimated from index model regressions as:
Apex: rA =0.2%+1.4rM
Bpex: rB =0.1%+0.6rM
Required:
What is the predicted returns for Apex & Bpex?
Which company do you think won the lawsuit?
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