If the CAPM is valid and all portfolios are priced correctly, which of the situations below is/are NOT possible? Consider each situation independently, and assume the risk-free rate is 5%. Situation A Portfolio RISKFREE MARKET ABC O Situation A only O Situation B only O Situation A and B ONeither situation Expected Return 5% 10% 12.5% BETA 0 1.0 1.3 Situation B Portfolio RISKFREE ABC XYZ Expected Return 5% 13.2% 14% BETA 0 1.0 0.8
If the CAPM is valid and all portfolios are priced correctly, which of the situations below is/are NOT possible? Consider each situation independently, and assume the risk-free rate is 5%. Situation A Portfolio RISKFREE MARKET ABC O Situation A only O Situation B only O Situation A and B ONeither situation Expected Return 5% 10% 12.5% BETA 0 1.0 1.3 Situation B Portfolio RISKFREE ABC XYZ Expected Return 5% 13.2% 14% BETA 0 1.0 0.8
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![QUESTION 9
If the CAPM is valid and all portfolios are priced correctly, which of the situations below is/are NOT possible? Consider each
situation independently, and assume the risk-free rate is 5%.
Situation A
Portfolio
RISKFREE
MARKET
ABC
Situation A only
Situation B only
Situation A and B
Neither situation
Expected Return
5%
10%
12.5%
BETA
0
1.0
1.3
Situation B
Portfolio
RISKFREE
ABC
XYZ
Expected
Return
5%
13.2%
14%
BETA
0
1.0
0.8](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F86ebb22d-cc82-42d9-8951-5690ba721e0a%2Feee6f8ac-6530-4844-8c5a-8aa4a82f49e0%2Fdd4ys0c_processed.png&w=3840&q=75)
Transcribed Image Text:QUESTION 9
If the CAPM is valid and all portfolios are priced correctly, which of the situations below is/are NOT possible? Consider each
situation independently, and assume the risk-free rate is 5%.
Situation A
Portfolio
RISKFREE
MARKET
ABC
Situation A only
Situation B only
Situation A and B
Neither situation
Expected Return
5%
10%
12.5%
BETA
0
1.0
1.3
Situation B
Portfolio
RISKFREE
ABC
XYZ
Expected
Return
5%
13.2%
14%
BETA
0
1.0
0.8
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