A Diversified Portfolio Has a Beta of 1

question 51

Multiple Choice

A diversified portfolio has a beta of 1.33 and a raw return of 9.38%. The market return is 10.10% and the market risk premium is 6.58%. What is Jensen's alpha of the portfolio?

• A)−3.62%
• B)−2.89%
• C)−.29%
• D)2.89%
• E)3.62%

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Definitions:

Equity Investments

Financial investments in stocks that represent ownership in a company or corporation.

Stock Market

A marketplace where stocks, bonds, and other securities are bought and sold, facilitating capital raising for companies and investment opportunities for individuals.

Expected Return

Return that an asset should earn on average.

Consumer Decision Making

The process by which consumers identify their needs, gather information, evaluate alternatives, and make choices regarding products and services.