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

question 42

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 fad follower's portfolio is closest to:

• A)-0.9%.
• B)0.0%.
• C)3.6%.
• D)6.0%.

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Definitions:

Learning Effectiveness

The degree to which learning objectives are achieved, often measured by the ability to recall or apply knowledge and skills.

Placebo

A safe tablet, medication, or operation given primarily for its mental comfort to the patient, rather than any physical impact.

Control Group

In experimental research, a group of subjects that does not receive the experimental treatment and is used as a baseline to compare the effects of the treatment.

Diabetes

A chronic condition characterized by high levels of sugar in the blood, due to the body's inability to produce or effectively use insulin.