15 What is Jensen's alpha of a portfolio comprised of 45 percent portfolio A and 55 percent...

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Finance

15
What is Jensen's alpha of a portfolio comprised of 45 percentportfolio A and 55 percent of portfolio B?

Portfolio Average Return Standard Deviation Beta
A 18.9 % 21.6 % 1.92
B 13.2 12.8 1.27

The risk-free rate is 3.1 percent and the market risk premiumis 6.8 percent.
2.04 percent
0.47 percent
1.08 percent
1.46 percent
?1.25 percent

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Solution The Jensens alpha of a Portfolio is calculated using the formula Jensens alpha Portfolio Return Risk Free Rate of Return Portfolio Beta Market Rate of Return Risk Free Rate of Return As per the information given in the question we have Risk free rate of return 3 1 In order to find the Jensens alpha we have to first deduce the following from the information given in the question Portfolio Return Portfolio Beta Market Rate of Return a See Answer

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Portfolio	Average Return		Standard Deviation		Beta
A	18.9	%	21.6	%	1.92
B	13.2		12.8		1.27


The risk-free rate is 3.1 percent and the market risk premiumis 6.8 percent.

		2.04 percent
		0.47 percent
		1.08 percent
		1.46 percent
		?1.25 percent