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

A) Option A
B) Option B
C) Option C
D) Option D

Question

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

A) Option A 
B) Option B 
C) Option C 
D) Option D

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.
D) Possible- 11eaaae8_8b65_2f06_a4b8_1391c837aadb_TB6474_11 = 11eaaae8_8b65_2f07_a4b8_8d766fdb22a6_TB6474_11

If the Simple CAPM Is Valid and All Portfolios Are