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dexar [7]
3 years ago
15

Consider the following information: Portfolio Expected Return Beta Risk-free 6 % 0 Market 10.2 1.0 A 8.2 1.4 a. Calculate the re

turn predicted by CAPM for a portfolio with a beta of 1.4. (Round your answer to 2 decimal places.) b. What is the alpha of portfolio A. (Negative value should be indicated by a minus sign. Round your answer to 2 decimal places.)
Business
1 answer:
denpristay [2]3 years ago
6 0

Answer:

a. 11.88%

b. -3.68%

Explanation:

Given that

Risk free rate = 6%

Beta = 1.4%

Market rate = 10.2%

Risk free rate = 6%

Alpha return = 8.2%

a. The computation of expected return of portfolio is given below:-

= Risk free rate + Beta (Market rate - Risk free rate)

= 6% + 1.4% (10.2% - 6%)

= 11.88%

b. The calculation of Alpha of portfolio is shown below:-

= Alpha return - Expected return

= 8.2% - 11.88%

= -3.68%

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Answer:

False

Explanation:

An increase in the demand for notebooks raises the quantity of notebooks demanded and also the quantity supplied

An increase in demand leads to a corresponding increase in supply

If the supply is not raised which will also increase the quantity of notebooks supplied, there will not be enough notebooks to meet the high demand for notebooks which brought about an increase in the quantity of notebooks demanded

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3 years ago
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Answer:

(a) 7.5%

(b) 8.5%

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Explanation:

(a) Foreign country inflation rate - US inflation rate = Foreign country risk free rate - US risk free rate

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X - 1.5 = 8 - 2

X - 1.5 = 6

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(b)

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(c)

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X - 1.5 = 10 - 2

X - 1.5 = 8

X = 7 + 1.5

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Answer:

Please see attached solution

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