Question
Four securities have the characteristics described in the following table: Stock A Stock B Stock C Stock D 4% 8% 10% 6% 2.2 1.5 0.5
Four securities have the characteristics described in the following table:
|
| Stock A | Stock B | Stock C | Stock D |
|
| 4% | 8% | 10% | 6% |
|
| 2.2 | 1.5 | 0.5 | 0.8 |
| ei | 4% | 8% | 4% | 2% |
Use the table and a Single Index Model for problems 14-17 to calculate the requested values for an equally weighted portfolio made up of the four assets, given an expected market return of 6% (Rm = 6%) and a market risk of 4% ( m = 4%).
What is the value of the portfolio's alpha?
| a. | Less than 5 | |
| b. | Greater than or equal to 5 but less than 6 | |
| c. | Greater than or equal to 6 but less than 7 | |
| d. | Greater than or equal to 7 but less than 8 | |
| e. | Greater than or equal to 8 |
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