A portfolio with a beta of 1.7 has a return of 15% and a standard deviation of 10%.If the risk-free rate is 5% and the market return is 119%,calculate the Jensen's alpha measure for the portfolio.

A) $ -0.005 $
B) $ -0.002 $
C) $ 0.004 $
D) $ 0.009 $

Question

A portfolio with a beta of 1.7 has a return of 15% and a standard deviation of 10%.If the risk-free rate is 5% and the market return is 119%,calculate the Jensen's alpha measure for the portfolio.

A) $ -0.005 $
B) $ -0.002 $
C) $ 0.004 $
D) $ 0.009 $

Quizplus · Accepted Answer

According to equation 20.6,we can calculate the Jensen's alpha measure for the portfolio as follows: (0.15 - 0.05)- 1.7(0.11 - 0.05)= -0.002.

A Portfolio with a Beta of 1 −0.005 -0.005 −0.005 B) −0.002 -0.002 −0.002

A Portfolio with a Beta of 1 $-0.005$ B) $-0.002$