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Unformatted text preview: d) Plot the two securities on SML graph. What are the alphas of each? e) What hurdle rate should be used by management of the aggressive firm for a project with the risk characteristics of the Defensive firms stock? For problems 10 to 16: if the simple CAPM is valid, which of the following situations are possible? Explain. Consider each situation independently. 10. Portfolio Expected return Beta A 20 1.4 B 25 1.2 11. Portfolio Expected return Standard deviation A 30 35 B 40 25 12. Portfolio Expected return Standard deviation Risk Free 10 0 Market 18 24 A 16 12 13. Portfolio Expected return Standard deviation Risk Free 10 0 Market 18 24 A 20 22 14. Portfolio Expected return Beta Risk Free 10 0 Market 18 1.0 A 16 1.5 15. Portfolio Expected return Beta Risk Free 10 0 Market 18 1.0 A 16 0.9 16. Portfolio Expected return Standard deviation Risk Free 10 0 Market 18 24 A 16 22...
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 Fall '08
 Chernyshoff,N
 Standard Deviation, Capital Asset Pricing Model, freemarket

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