Assume that both X and Y are well-diversified portfolios and the risk-free rate is 8%. Portfolio X has an expected return of 14% and a beta of 1. Portfolio Y has an expected return of 9.5% and a beta of .25. In this situation, you would conclude that portfolios X and Y .A. are in equilibriumB. offer an arbitrage opportunityC. are both underpricedD. are both fairly priced

The correct option is A, Portfolios X and Y are in equilibrium

Explanation:

Adopting Miller and Modgiliani Capital Asset Pricing Model formula, the return on both portfolios can be determined:

Expected return=Risk free return+Beta(Market return-Risk free return)

Portfolio X:

Risk free return=8%

Beta=1.0

Expected return=14%

Let market return be MR

14%=8%+1.0(MR-8%)

14%-8%=1.0*(MR-8%)

6%=MR-8%

MR=6%+8%

MR=14%

Portfolio Y:

Risk free return=8%

Beta=0.25

Expected return=9.5%

let market return be MR

9.5%=8%+0.25(MR-8%)

9.5%-8%=0.25MR-2%

1.5%=0.25MR-2%

1.5%+2%=0.25MR

0.25MR=3.5%

MR=3.5%/0.25

MR=14%

Hence both portfolios are at equilibrium since they have the same market return

(i know i'm late but the answer's "things about yourself" because you want to list things you're capable of, why you want to open up the business, the amount of money you're putting into it,etc.) i'm guessing you take online school small business, the answers to the quizzes are all over quizlet. just look up your question and type quizlet after it and it'll pop up.

answer: technology

hope i

-lavira: )