Assume that the economy has three types of people. 20% are fad followers, 75% are passive investors, and 5% are informed traders. The portfolio consisting of all informed traders has a beta of 1.4 and an expected return of 16%. The market has an expected return of 10% and the risk free rate is 4%.

The alpha for the informed investors is closest to:

A.

0.0%

B.

0.9%

C.

2.4%

D.

3.6%