Suppose that all the unrealistic assumptions of the CAPM are true (the CAPM is valid)!!! The market portfolio has an expected return equal to 15% and the risk free rate is 5%. We are mainly interested in 2 securities in the market; stocks A and B. The beta of stock A is 1.8 and the expected return of stock B is 10%

4. Estimate the alpha of stock A.

5. Estimate the expected return and the beta of an equally weighted portfolio Z consisting of stocks A and B.

6. Estimate the alpha of portfolio Z.