If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below are possible? Consider each situation independently and assume the risk-free rate is 5%.

Question

Quizplus · Accepted Answer

A) Not possible; two portfolios with different betas cannot have the same expected return.
B) Not possible; under CAPM, market portfolio must yield highest CAL.
C) Not possible; Portfolio A and the market have different excess returns per unit of risk. 11ee763a_a7b9_3ea4_90da_a9abce4947ee_TB10008_00 D) Possible

If the Simple CAPM Is Valid and All Portfolios Are