It would be great if you guy can comment on my answer for below two questions. Thank you very much.
1. Is it possible that a risky asset could have a beta of zero? Explain. Based on CAPM, what is the expected return on such an asset?
NO. A RISKY ASSET CAN NOT HAVE A ZERO BETA. ONLY RISK FREE ASSET HAVE A ZERO BETA THE EXPECTED RETURN ON SUCH AN ASSET IS RISK FREE RATE US TREASURY BOND YIELD RATE:
2. Is it possible that a risky could have a negative beta? What does the CAPM predict about the expected return on such asset? Can you give an explanation for your answer?
YES. A STOCK WHOSE PRICE MOVES CONTRARILY TO A STOCK MARKET CAN HAVE A NEGATIVE BETA. IN THIS CASE, THE CAPM BASED EXPECTED RETURN IS LOWER THAN A NORMAL POSIVE BETA STOCK AS BETA IS NEGATIVE.