Suppose that investors can hold one of the three risky portfolios below and can combine it with a risk$-$free asset yielding $4\%.$ They can borrow or invest in the risk$-$free asset.

Portfolio A has an expected return of $4\%$ and a volatility of $20\%.$

Portfolio B has an expected return of $5\%$ and a volatility of $40\%.$

Portfolio C has an expected return of $6\%$ and a volatility of $70\%.$

Which of these portfolios should a risk$-$averse investor select?

Portfolio A

Portfolio B

Portfolio C

Portfolios A and B are tied for the best choice

It depends on the investor's risk aversion

Suppose Boeing stock has market beta of $1\mathrm{.}75$ and an expected return of $8\%.$ Suppose the stock market has an expected return of $6\%,$ and the risk$-$free rate is $2\%.$ What is the CAPM alpha of Boeing stock? Assume the stock market is representative of the entire market portfolio.

$-1\%$

$0\%$

$2\%$

None of the above