A Portfolio Has an Actual Return of 15

question 74

Multiple Choice

A portfolio has an actual return of 15.17 percent,a beta of 0.90,and a standard deviation of 7.2 percent.The market return is 13.4 percent and the risk-free rate is 2.8 percent.What is the portfolio's Jensen's alpha?

• A) 2.25 percent
• B) 2.51 percent
• C) 2.67 percent
• D) 2.83 percent
• E) 3.04 percent

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Definitions:

Net Income

The total profit or loss of a company after all revenues, costs, expenses, and taxes have been accounted for.

Common Stock

A type of security that represents ownership in a corporation, granting holders voting rights and a share in the company’s profits through dividends.

Return On Total Assets

A profitability ratio measuring net income produced by total assets during a period by comparing net income to the average total assets.

Dividends

Distributions to shareholders from a corporation, typically originating from the firm's earnings.