A diversified portfolio has a beta of 1.47 and a raw return of 14.28 percent.The market return is 11.74 percent and the market risk premium is 7.85 percent.What is Jensen's alpha of the portfolio?
A) −1.15 percent
B) −0.86 percent
C) −0.29 percent
D) 0.48 percent
E) 0.62 percent

Question

Quizplus · Accepted Answer

Jensen's alpha = 0.1428 − [(0.1174 − 0.0785) + 1.47 (0.0785)] = −1.15 percent

A Diversified Portfolio Has a Beta of 1