You Have Two Portfolios,A and B

question 57

Essay

You have two portfolios,A and B.Portfolio A has an expected return of 20 percent and a beta of 1.4.Portfolio B has an expected return of 25 percent and a beta of 1.2.Is this scenario consistent with the CAPM? Why or why not?

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Definitions:

Specialize

Refers to the process of focusing on a specific area of knowledge or skill within a broader field.

Comparative Advantage

The ability of a party to produce a particular good or service at a lower marginal and opportunity cost over another.

Absolute Advantage

The ability of a country or entity to produce a good or service more efficiently than its competitors.

Absolute Advantage

Refers to the ability of a country, company, or individual to produce a good or service at a lower cost per unit than any competitor using the same amount of resources.