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Calculate portfolio X beta assuming that: risk-free rate is4,5%, market portfolio rate of return is...

Calculate portfolio X beta assuming that: risk-free rate is 4,5%, market portfolio rate of return is 18%, portfolio X expected rate of return is 19,2% and the portfolio X Jensen alpha is 0,0051.


Solutions

Expert Solution

1. Computation of Required rate of return

Required Rate of return = Jensen Alpha + Expected rate of return

Required Rate of return = 0.0051 + 0.192

Required Rate of return = 19.71%

2. Computation of Portfolio Beta = (required return - risk free rate) / (market Rate - risk free return)

Portfolio Beta = (19.71% - 4.50%) / (18% - 4.50%)

Portfolio Beta = 1.1267

jeff jeffy answered 2 years ago
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