eroblems lhe agaressive tor ve firm\'s stok? 10 to 16: If the simple CAPM is val

Question

eroblems lhe agaressive tor ve firm's stok? 10 to 16: If the simple CAPM is valid, which of the following situations firm for a project with are possible? Explain. Consider each situation independently io PorttolioExpected ReturnBeta 1.4 12 Standard 25 1 I1: Expected ReturnDeviation 30 40 35 Standard Expected ReturnDeviation Portfolio operly Risk-free 10 24 12 on the 16 13. Standard Deviation Portfolio Risk-free Market Expected Return 10 18 20 24 14 Portfolio Beta Expected Return 10 18 16 Inc. Risk-free Market 1.0 1.5 the Beta Expected Return 10 15. Portfolio Risk-free Market 1.0 0.9 16 Standard Portfolio Expected Return Deviation Risk-free Market 16 10 24 that the risk-free rate of interest is 6% and the expected

Explanation / Answer

The situations that will be valid should have the following characteristics:

Zero standard deviation for risk free portfolio

And the portfolio with less return should have less standard deviation.

Based on this checking, the following are valid:

12, 15 and 16.

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