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What is the predicted returns for apex-bpex

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In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on Apex was rA = 3.5%. The rate of return on Bpex was only rB = 2.9%. The market today responded to very encouraging news about the unemployment rate, and rM = 3.2%. The historical relationship between returns on these stocks and the market portfolio has been estimated from index model regressions as:

Apex: rA =   0.4% + 1.1rM

Bpex: rB = -0.1% + 0.5rM

a. What is the predicted returns for Apex & Bpex

Reference no: EM132022749

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