Suppose the Risk-Free Return Is 4

question 27

Multiple Choice

Suppose the risk-free return is 4%. The beta of a managed portfolio is 1.2, the alpha is 1%, and the average return is 14%. Based on Jensen's measure of portfolio performance, you would calculate the return on the market portfolio as

• A) 11.5%.
• B) 14%.
• C) 15%.
• D) 16%.

---

Definitions:

Refund Liability

Refund Liability is an obligation arising from the potential need to repay customers for returned or unsatisfactory goods and services.

Merchandise Returns

Goods that are returned to the seller from the buyer, generally due to defects, dissatisfaction, or the wrong items being delivered.

Sales

The total amount of goods or services sold by a company during a specific period, often used as a measure of business performance.

Cash Sales

Transactions in which goods or services are paid for in full using cash at the time of sale.