Ask Question
BusinessBusiness
15 June, 14:02

Consider the following information: Portfolio Expected Return Beta Risk-free 5 % 0 Market 11.2 1.0 A 9.2 1.9 a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.9. (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.) c. If the simple CAPM is valid, is the situation above possible? Yes No

+2
Answers (1)
  1. 15 June, 16:30
    0
    The calculations are shown below:

    Explanation:

    The calculations are shown below:

    a. The expected rate of return is

    Return = Risk free return + Beta * (Market return - risk free return)

    = 5% + 1.9 * (11.20% - 5%)

    = 5% + 11.78%

    = 16.78%

    b. Now the alpha is

    Alpha = Actual rate of return - Expected rate of return

    = 9.2% - 16.78%

    = - 7.58%

    c. No, the CAPM is not valid as the expected rate of return is more than the actual rate of return
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Consider the following information: Portfolio Expected Return Beta Risk-free 5 % 0 Market 11.2 1.0 A 9.2 1.9 a. Calculate the return ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
If a business buyer estimates that 20 percent is a reasonable rate of return for an existing business expected to produce a profit of $27,000, its capitalized value would be
Answers (1)
You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 the firm: A. is cost minimizing. B.
Answers (1)
When radio is used as an advertising medium, which of the following statements is usually true. a. Local customers embrace radio advertising. b. Radio advertising is usually very expensive. c. Segmentation strategies cannot be applied. d.
Answers (1)
The own price elasticity of Anne's apple pies is 5. If the aggregate market for apple pies has its own price elasticity of 1.25, Anne's apple pies have an approximate market share of: a) 6.25% b) 25% c) 10% d) 20%
Answers (1)
What is a book of balance
Answers (1)
New Questions in Business
An employment test for men is used by a police department to find successful candidates. A woman who was denied employment with the police department based on her test scores sues the police chief.
Answers (1)
What is a great marketing strategy
Answers (2)
Ralph owns a small pizza restaurant, where he works full-time in the kitchen. his total revenue last year was $100,000, and his rent was $3,000 per month.
Answers (1)
According to the market theory of wage determination, under what circumstances will wages for a paticular group be highest? A. When there is now demand for this type of labor. B. When demand is high and supply is low. C.
Answers (1)
Linear programming, simulation and waiting line theory are most closely associated with which era in the historical development of operations management? human relations operations research globalization Internet revolution
Answers (1)
Home » Business » Consider the following information: Portfolio Expected Return Beta Risk-free 5 % 0 Market 11.2 1.0 A 9.2 1.9 a. Calculate the return predicted by CAPM for a portfolio with a beta of 1.9. (Round your answer to 2 decimal places.) b.
Sign Up Forgot Password?