What is the alpha of a portfolio with a beta of 2 and actual return of 15%?
A) 0%
B) 13%
C) 15%
D) 17%

Name: What is the alpha of a portfolio with a beta of 2 and actual return of 15%? A) 0% B) 13% C) 15% D) 17%
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Question

What is the alpha of a portfolio with a beta of 2 and actual return of 15%?
A) 0% 
B) 13% 
C) 15% 
D) 17%

Quizplus · Accepted Answer

CAPM E(r_i) = 5% + 2(10% - 5%) = 15%; Alpha = Actual return - Expected return = 15% - 15% = 0% A portfolio with a return of 15% and a beta of 2 lies on the SML and therefore has an alpha of zero.

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