A Portfolio Has a Beta of 1

question 25

Multiple Choice

A portfolio has a beta of 1.52 and an actual return of 13.7 percent.The risk-free rate is 2.7 percent and the market risk premium is 7.8 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)1.37 percent

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Definitions:

Accounting Information System

A system designed to collect, store, and process financial and accounting data, and produce informational reports for decision making.

Cost Effectiveness

Evaluation of how efficiently resources are used to achieve a goal, usually expressed in cost per unit of outcome.

Useful Output

The amount of goods or services produced that meet the quality and functionality requirements.

Columnizing

The process of organizing data or information into columns to facilitate analysis or comparison.