CAPM. Assume the following: the risk-free rate is 8 percent, and the market portfolio expected return is 12 percent. Portfolio              Beta A                             0.6...

CAPM. Assume the following: the risk-free rate is 8 percent, and the market portfolio expected return is 12 percent.

Portfolio              Beta

A                             0.6

B                             1.0

C                             1.4

(a) Calculate for each of the three portfolios the expected return consistent with the capital asset pricing model. (b) Show graphically the expected portfolio returns in (a). (c) Indicate what would happen to the capital market line if the expected return on the market portfolio were 10 percent (CFA, adapted.)