Question

In: Finance

Consider the following information: Portfolio Expected Return Beta Risk free. 12% 0 Market 12.6% 1 A...

Consider the following information:

Portfolio Expected Return Beta

Risk free. 12% 0

Market 12.6% 1

A 10.6% 0.7

a) calculate the expected return of Portfolio A with a beta of 0.7

b) what is the alpha of portfolio A?

Solutions

Expert Solution

a) Expected return = risk free rate + (market return - risk free rate) *beta

= 12% + ( 12.6% - 12%) * .7 = 12.42%

b) Alpha = Portfolio return - expected return = 10.6% - 12.42% = -2.42%

jeff jeffy answered 2 years ago
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