Consider the following information: Portfolio Expected Return Beta Risk-free 5% 0 Market 12.4 1.0 A 10.4 1.7 Required: a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.7. (Round your answer to 2 decimal places.) b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) c. If the simple CAPM is valid, is the situation above possible?

Consider the following information: Portfolio Expected Return Beta Risk-free 5% 0 Market 12.4 1.0 A 10.4 1.7 Required: a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.7. (Round your answer to 2 decimal places.) b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) c. If the simple CAPM is valid, is the situation above possible?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter6: Risk And Return

Section: Chapter Questions

Problem 14P

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Portfolio	Expected Return	Beta
Risk-free	5%	0
Market	12.4	1.0
A	10.4	1.7

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