Use the Following Information to Answer the Question(s)below

question 4

Multiple Choice

Use the following information to answer the question(s) below.
Assume that the economy has three types of people.20% are fad followers,75% are passive investors,and 5% are informed traders.The portfolio consisting of all informed traders has a beta of 1.4 and an expected return of 16%.The market has an expected return of 10% and the risk-free rate is 4%.
-The alpha for the informed investors is closest to:

• A)-2.4%.
• B)-0.9%.
• C)0.0%.
• D)3.6%.

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