Question

all parts please

8 of 11 (2 complele HW OCCre Score: 0 of 1 pt EQu P13.15 (similar to) The return on the market portfolio during the year just ended was 10.8 % Chee Chew's portfolio has a beta of 1.22 and eamed a rehum of 13.2 % during the year just ended. The risk free rate is currently 4.7 % a. Caloulate Jensen's measure (Jensen's alpha) for Chee's portolio for the year just ended b. Compare the performance of Chee's portlolio found in part a to that of Cani Uhs portfolio, which has a Jensen's measure of-0.19. Which portfollo performed better? Explain c. Use your findings in part a to disouss the performance of Chee's portfolio during the period just ended (Round to two decimal places) a. The Jensen's measure (Jensen's alpha) for Chee's portfolio is Enter your anwer in the answer box and then click Check Answer Check Anwer 2 arts remaining Clear All MacBook Air 20 esc 6 7 3 5

Answer 1

a, Rate of Return using CAPM =Risk Free Rate+Beta*(Market Return -Risk Free Rate) =4.7%+1.22*(10.8%-4.7%) =12.142%
Jensen Alpha =Expected Return -Required Rate of Return =13.2% -12.142% =1.06%

b.Chee;s portfolio is better because it has higher Jensen Alpha.than alpha of -0.19. Higher the Jensen Alpha it has beaten the market returns and provided more returns than the risk adjusted returns.

c, Chee;s Performance has exceeded market expectations and has beaten required rate of return using CAPM