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

question 44

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 passive investors is closest to:

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

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Definitions:

Promissory Estoppel

A legal principle where a promise is enforceable by law, even if made without formal consideration, when a promisor has made a promise to a promisee who then relies on that promise to his or her detriment.

Legal Enforcement

The act of compelling compliance with the law, often through police or judicial action.

Statute of Frauds

A legal principle requiring certain contracts to be in writing and signed by the parties involved to be enforceable.

Subject of Agreement

The specific matter or issue that is being agreed upon or contracted between parties.