Question

You are provided some data about the market: The expected return of the market portfolio is...

You are provided some data about the market: The expected return of the market portfolio is 10.8%, the market's volatility is 13.4%, and the risk-free rate is 1.9%.

If the beta of LEVI is 1.56, according to the CAPM, LEVI should have some expected return. However, you think that LEVI has an expected return of 13.4%.

What do you think is the alpha of LEVI?

Over the last year, the market realized a return of 16.8%, while the risk-free rate was 4%. During this period, your own portfolio, which has a beta of 0.97, realized a return of 15.8%.

What was the realized alpha on your portfolio, based on the CAPM?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You are provided some data about the market: The expected return of the market portfolio is...
You are provided some data about the market: The expected return of the market portfolio is 11.8%, the market's volatility is 13.9%, and the risk-free rate is 2.9%. If the beta of Johnson & Johnson (JNJ) is 0.83, according to the CAPM, what is the expected return of JNJ? {Give your answer as a percentage with 2 decimals, e.g., if the answer is 0.0345224 (or 3.45224%) , enter 3.45 as your answer.} Hint: basic CAPM question. See conclusion 4 of...
Suppose that the market portfolio has an expected return of 10%, and a standard deviation of...
Suppose that the market portfolio has an expected return of 10%, and a standard deviation of returns of 20%. The risk-free rate is 5%. b) Suppose that stock A has a beta of 0.5 and an expected return of 3%. We would like to evaluate, according to the CAPM, whether this stock is overpriced or underpriced. First, construct a tracking portfolio, made using weight K on the market portfolio and 1 − K on the risk-free rate, which has the...
A portfolio invests in a risk-free asset and the market portfolio has an expected return of...
A portfolio invests in a risk-free asset and the market portfolio has an expected return of 7% and a standard deviation of 10%. Suppose risk-free rate is 5%, and the standard deviation on the market portfolio is 22%. For simplicity, assume that correlation between risk-free asset and the market portfolio is zero and the risk-free asset has a zero standard deviation. According to the CAPM, which of the following statement is/are correct? a. This portfolio has invested roughly 54.55% in...
a) Suppose the risk-free rate is 4.4% and the market portfolio has an expected return of...
a) Suppose the risk-free rate is 4.4% and the market portfolio has an expected return of 10.9%. The market portfolio has variance of 0.0391. Portfolio Z has a correlation coefficient with the market of 0.31 and a variance of 0.3407. According to the capital asset pricing model, what is the beta of Portfolio Z? What is the expected return on Portfolio Z? b) Suppose Portfolio X has beta of 1 with expected return of 11.5%. Draw the SML and comment...
You have a portfolio with 60% allocation of funds to the market portfolio and remaining amount...
You have a portfolio with 60% allocation of funds to the market portfolio and remaining amount is allocated to a risk-free asset. The beta of your portfolio is _____ . a. 0 b. 0.6 c. 1 d. 1.5 Which of the following statements is false? a. SML is the graphical representation of expected return-beta relationship of the CAPM. b. Slope of SML is the market risk premium. c. Alpha is the abnormal rate of return on a security in excess...
If the expected rate of return on the market portfolio is 14% and the risk free...
If the expected rate of return on the market portfolio is 14% and the risk free rate is 6% find the beta for a portfolio that has expected rate of return of 10%. What assumptions concerning this portfolio and or market condition do you need to make to calculate the portfolio’s beta? b. what percentage of this portfolio must an individual put into the market portfolio in order to achieve an expected return of 10%?
Congratulations! Your portfolio returned 12.7% last year, 1.9% better than the market return of 10.8%. Your...
Congratulations! Your portfolio returned 12.7% last year, 1.9% better than the market return of 10.8%. Your portfolio had a standard deviation of earnings equal to 18%, and the risk-free rate is equal to 5.1%. Calculate Sharpe's measure for your portfolio. If the market's Sharpe's measure is 0.32, did you do better or worse than the market from a risk/return perspective? The​ Sharpe's measure of your portfolio is (round to two decimal places) Your​ portfolio's performance is (Superior , Inferior or...
Assume the CAPM holds. The risk-free rate is 5% and the market portfolio expected return is...
Assume the CAPM holds. The risk-free rate is 5% and the market portfolio expected return is 15% with a standard deviation of 20%. An asset has an expected return of 16% and a beta of 0.8. a) Is this asset return consistent with the CAPM? If not, what expected return is consistent with the CAPM? b) How could an arbitrage profit be made if this asset is observed? c) Would such a situation be expected to exist in the longer...
Consider the following information: Portfolio Expected Return Beta Risk-free 12 % 0 Market 13.8 1.0 A...
Consider the following information: Portfolio Expected Return Beta Risk-free 12 % 0 Market 13.8 1.0 A 11.8 0.9 a. Calculate the expected return of portfolio A with a beta of 0.9. (Round your answer to 2 decimal places.) Expected return             % b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.) Alpha             % c. If the simple CAPM is valid, is the above situation possible? Yes...
If the return on portfolio A is 13%, the market portfolio return is 8%, the inflation...
If the return on portfolio A is 13%, the market portfolio return is 8%, the inflation rate is 4%, the risk-free rate is 5%, the standard deviation of the return for portfolio A is 8% and the standard deviation of the return on the market portfolio is 14%, and the portfolio A’s beta is 0.8, the Jensen’s alpha for market portfolio will be 5.60%. A. True B. False If the return on portfolio A is 6%, the market portfolio return...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT