Consider the following information:
Portfolio | Expected Return | Beta | |
Risk-free | 7 | % | 0 |
Market | 12.2 | 1.0 | |
A | 11.0 | 1.6 | |
a. Calculate the return predicted by CAPM for a
portfolio with a beta of 1.6. (Round your answer to 2
decimal places.)
b. What is the alpha of portfolio A.
(Negative value should be indicated by a minus
sign. Round your answer to 2 decimal
places.)
a) Return predicted by CAPM:-
=Rf+beta*(Rm-Rf)
=7%+1.6*(12.2%-7%)
=15.32%
b) Alpha of portfolio A:-
=Expected return-CAPM return
=11%-15.32%
=-4.32%
Consider the following information: Portfolio Expected Return Beta Risk-free 7 % 0 Market 12.2 1.0 A...
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