A portfolio has a Jensen's alpha of .93%, a beta of 1.45, and a CAPM expected return of 8.8%. The risk-free rate is 2.5%. What is the actual return of the portfolio?
A)5.53%
B)6.17%
C)7.83%
D)9.73%
E)21.9%

Question

Quizplus · Accepted Answer

Jensen's alpha is the difference between the actual return and the expected return based on the CAPM model. Given a Jensen's alpha of .93% and a CAPM expected return of 8.8%, the actual return is 8.8% + .93% = 9.73%.

A Portfolio Has a Jensen's Alpha of