The Market Is Expected to Generate a 11% Return and the Risk

question 72

Multiple Choice

The market is expected to generate a 11% return and the risk free rate is 4%. A portfolio manager has 80% of her capital allocated to stock A with a beta of 0.9, which generated a total return of 12%. 20% of her capital is allocated to stock B with a beta of 1.3, which generated a total return of 13%. What Alpha was generated by the manager by allocating more capital to stock A?

• A) 0.85%
• B) 1.18%
• C) 1.34%
• D) 1.59%

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