A Portfolio Has a Beta of 1

question 63

Multiple Choice

A portfolio has a beta of 1.30 and an actual return of 15.5 percent.The risk-free rate is 3.5 percent and the market risk premium is 8.2 percent.What is the value of Jensen's alpha?

• A) −0.86 percent
• B) 1.01 percent
• C) 1.14 percent
• D) 1.23 percent
• E) 1.34 percent

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Definitions:

Stop Payment

An order given to a bank to not pay out on a check that has been issued but not yet cashed.

Electronic Fund Transfer

The movement of funds between different bank accounts electronically without the need for physical paper money.

Draft

A preliminary version of a piece of writing or a plan, or a banking term referring to a written order by one party to pay a certain sum to another party.

Instrument

A formal legal document representing a right to payment or to an interest in property.