Bear Market	Normal market	Bull market
Probability	0.2	0.5	0.3
Return on P	-20%	18%	50%

Assume that the risk-free rate is 9%, and the expected return and standard deviation on the market portfolio M is 0.19 and 0.20, respectively. The correlation coefficient between portfolio P and the market portfolio M is 0.6.

Answer the following questions:

• Is P efficient? No as P does not equal NP
• What is the beta of portfolio P?

0.2	0.5	0.3	0.19	Correlation	0.6
-0.2	0.18	0.5	0.2
Beta Bear	0.4	-0.01	-40
Beta Normal	0.32	-0.01	-32
Beta Bull	-0.2	-0.01	20

What is the alpha of portfolio P? Is P overpriced or underpriced