Reference no: EM131056176
If CAPM is valid, which of the following situations are possible? Explain. Consider each situation independently. Hint: recall that the CAPM has implications for expected returns, correlations, covariances and variances.
a) Portfolio A - Expected Return =20, Beta=1.4
Portfolio B - Expected Return =25, Beta=1.2
b) Portfolio A - Expected Return =30, SD=35
Portfolio B - Expected Return =45, SD=25
c) Portfolio Rf - Expected Return =10, SD=0
Portfolio Market - Expected Return =18, SD=24
Portfolio A - Expected Return=16, SD=12
d) Portfolio Rf - Expected Return =10, SD=0
Portfolio Market - Expected Return =18, SD=24
Portfolio A - Expected Return=20, SD=22
e) Portfolio Rf - E(r)=10, Beta=0
Portfolio Market - E(r)=18, Beta=1
Portfolio A - E(r)=16, Beta=1.5
f) Portfolio Rf - E(r)=10, Beta=0
Portfolio Market - E(r)=18, Beta=1
Portfolio A - E(r)=16, Beta=0.9
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