Use the Information for the Question(s)below

question 119

Multiple Choice

Use the information for the question(s) below.
Suppose that the risk-free rate is 5% and the market portfolio has an expected return of 13% with a volatility of 18%.Monsters Inc.has a 24% volatility and a correlation with the market of .60,while California Gold Mining has a 32% volatility and a correlation with the market of -.7.Assume the CAPM assumptions hold.
-Suppose that California Gold Mining's expected return is 2%.Then California Gold Mining's alpha is closest to:

• A)-3%.
• B)-13%.
• C)7%.
• D)-11%.

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Definitions:

Curiosity

is the intrinsic desire or motivation to learn, explore, and seek out new knowledge or experiences, driven by the pursuit of understanding unfamiliar aspects of one's environment.

Sensation Seeking

A personality trait defined by the search for experiences and feelings that are varied, novel, complex, and intense, and the willingness to take physical, social, legal, and financial risks for the sake of such experiences.

Risks

The potential for losing something of value or the possibility of an unfavorable outcome.

Sensation Seeking Behavior

A trait characterized by the search for experiences and feelings that are varied, complex, novel, and intense.