Question

The market is expected to generate a 12% return and the risk free rate is 4%. A portfolio manager has 70% of her capital allocated to stock A with a beta of 0.8, which generated a total return of 11%. 30% of her capital is allocated to stock B with a beta of 1.1, which generated a total return of 12%. What Alpha was generated by the manager by allocating more capital to stock A? A. .11% B. .18% C. .25% D. .38%

Name: the market is expected to generate a 12 return and the risk free rate is 4 a portfolio manager has 70 of her capital allocated to stock a with a beta of 08 which generated a total return of 48298
Uploaded: 2022-02-07T05:18:41-08:00
Duration: 2 min 15 s
Channel: Lakshya H
Description: the market is expected to generate a 12 return and the risk free rate is 4 a portfolio manager has 70 of her capital allocated to stock a with a beta of 08 which generated a total return of 48298

          The market is expected to generate a 12% return and the risk
free rate is 4%. A portfolio manager has 70% of her capital
allocated to stock A with a beta of 0.8, which generated a total
return of 11%. 30% of her capital is allocated to stock B with a
beta of 1.1, which generated a total return of 12%. What Alpha was
generated by the manager by allocating more capital to stock A?
A. .11%
B. .18%
C. .25%
D. .38%

Added by Randall H.

Elementary Statistics a Step by Step Approach

Allan G. Bluman 9th Edition

Instant Answer

Solved by Expert Lakshya H

02/07/2022

Step 1

70 * 0.11 = 0.077 Weighted return of stock B = 0.30 * 0.12 = 0.036 Portfolio return = 0.077 + 0.036 = 0.113 or 11.3% Show more…

Show all steps

Thanks for your feedback!

The market is expected to generate a 12% return and the risk free rate is 4%. A portfolio manager has 70% of her capital allocated to stock A with a beta of 0.8, which generated a total return of 11%. 30% of her capital is allocated to stock B with a beta of 1.1, which generated a total return of 12%. What Alpha was generated by the manager by allocating more capital to stock A? A. .11% B. .18% C. .25% D. .38%