A Portfolio Has an Average Return of 14 Percent, a Standard

question 26

Multiple Choice

A portfolio has an average return of 14 percent, a standard deviation of 27 percent, and a beta of 1.15. The risk-free rate is 4.5 percent, and the expected return of the market is 12 percent. What is Jensen's alpha for the portfolio?

• A) 0.705%
• B) 0.625%
• C) 0.875%
• D) 0.550%
• E) 0.920%

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Definitions:

Pearl Harbor

The site of a surprise military strike by the Japanese Navy Air Service upon the United States against the naval base at Pearl Harbor in Honolulu, Hawaii, on December 7, 1941, leading the United States into World War II.

Turning Point

A pivotal moment in time that represents a significant change or shift in direction in historical, cultural, or personal narratives.

World War II Europe

The European theater of World War II, a global conflict lasting from 1939 to 1945 involving most of the world's nations including all the great powers.

Warsaw

The capital and largest city of Poland, known for its resilient history, including significant destruction during World War II and its subsequent rebuilding.