The Market Is Expected to Generate a 12% Return and the Risk

question 82

Multiple Choice

The market is expected to generate a 12% return and the risk free rate is 4%. A portfolio manager has 70% of her capital allocated to stock A with a beta of 0.8, which generated a total return of 11%. 30% of her capital is allocated to stock B with a beta of 1.1, which generated a total return of 12%. What Alpha was generated by the manager by allocating more capital to stock A?

• A) 0.11%
• B) 0.18%
• C) 0.25%
• D) 0.38%

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Definitions:

Self-help Group

A voluntary association of individuals who share a common condition or problem, supporting each other to cope or improve their situation.

Systematic Desensitization

A behavioral therapy technique used to reduce phobias and anxiety through gradual exposure to the feared object or situation combined with relaxation exercises.

Emotional Support

Assistance provided through empathy, concern, and encouragement to help individuals manage and express their emotions.

Reinforcer

Anything that follows a response and strengthens it or increases the probability that it will occur.