A portfolio with a beta of 0.5 has a return of 5% and a standard deviation of 10%.If the risk-free rate is 2% and the market return is 9%,calculate the Jensen's alpha measure for the portfolio.

A) $ -0.005 $
B) $ 0.040 $
C) $ 0.055 $
D) $ 0.057 $

Question

A portfolio with a beta of 0.5 has a return of 5% and a standard deviation of 10%.If the risk-free rate is 2% and the market return is 9%,calculate the Jensen's alpha measure for the portfolio.

A) $ -0.005 $
B) $ 0.040 $
C) $ 0.055 $
D) $  0.057 $

Quizplus · Accepted Answer

According to equation 20.6,we can calculate the Jensen's alpha measure for the portfolio as follows: (0.05 - 0.02)- 0.5(0.09 - 0.02)= -0.005.

A Portfolio with a Beta of 0 −0.005 -0.005 −0.005 B) 0.040 0.040 0.040

A Portfolio with a Beta of 0 $-0.005$ B) $0.040$