Suppose the Risk-Free Return Is 3

question 20

Multiple Choice

Suppose the risk-free return is 3%.The beta of a managed portfolio is 1.75,the alpha is 0%,and the average return is 16%.Based on Jensen's measure of portfolio performance,you would calculate the return on the market portfolio as

• A)12.3%
• B)10.4%
• C)15.1%
• D)16.7%
• E)none of the above

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Definitions:

Capital Budgeting

The process of planning and evaluating investments in long-term assets, considering the potential returns and strategic fit with the organization's goals.

Straight-Line Depreciation

A method of allocating the cost of an asset evenly over its useful life.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to assess the profitability of an investment.

Capital Budgeting

The process of making investment decisions in long-term assets and projects by evaluating their potential financial returns.