consider the following data for a single factor model economy. all portfolios are well diversified. suppose portfolio p has an expected return of 19% and beta of 2.0. portfolio m has an expected retrun of 12% and beta of 1.0. assume that the risk free rate is 7% and that arbitrage opportunities exist. what is the portfolio p's alpha?

Consider an asset with a beta of 1.2, a risk-free rate of 4.3%, and a market return of 12%. What is the reward-to-risk ratio in equilibrium? What is the expected return on the asset?

Consider the information given in the Table 2A and complete Table 2B. From the completed Table 2B, use the information to graphically present the Security Market Line (SML). Compute the slope of thisline.Hints:i) When 100% money is invested in asset X (portfolio weight = 1), the beta of the portfolio is 0.85ii) Since the risk-free asset is, well, risk-free, its beta will be zero

Consider the following information for four portfolios, the market, and the risk-free rate (RFR): Portfolio Return Beta SD A1 0.15 1.25 0.182 A2   0.1  0.9 0.223 A3 0.12  1.1 0.138 A4 0.08  0.8 0.125 Market 0.11     1    0.2 RFR 0.03     0       0 Refer to Exhibit 18.6. Calculate the Jensen alpha Measure for each portfolio.   a. A1 = 0.014, A2 = -0.002, A3 = 0.002, A4 = -0.02     b. A1 = 0.002, A2 = -0.02, A3 = 0.002, A4 = -0.014     c. A1 = 0.02, A2 = -0.002, A3 = 0.002, A4 = -0.014     d. A1 = 0.03, A2 = -0.002, A3 = 0.02, A4 = -0.14     e. A1 = 0.02, A2 = -0.002, A3 = 0.02, A4 = -0.14

Consider the following graph.   According to Markowitz’ portfolio theory, which point on the graph represents optimal portfolio?       C     A     B     D

* Consider the following portfolio II: long one call with exercise price E₁, long one put with exercise price E2, short one call with exercise price E, and short one put with exercise price E1+E2 E. Consider the case E₁ < E < E2 where E < 2 ⚫ (a) Write down the pay-off function A(S) for the portfolio II. • • (b) What is the value of the pay-off function when S < E₁? (c) What is the value of the pay-off function when E < S < E₂?

Consider the information given in the Table 2A and complete Table 2B. From the completed Table 2B, use the information to grpahically present the Security Market Line (SML). Compute the slope of this line.Hints: i) When 100% money is invested in asset X (portfolio weight = 1), the beta of the portfolio is 0.85ii) Since the risk-free asset is, well, risk-free, its beta will be zero

Consider the information given in the Table 2A and complete Table 2B. From the completed Table 2B, use the information to grpahically present the Security Market Line (SML). Compute the slope of this line. Hints: i) When 100% money is invested in asset X (portfolio weight = 1), the beta of the portfolio is 0.85ii) Since the risk-free asset is, well, risk-free, its beta will be zero

Suppose that you use Arbitrage Pricing Theory (APT) to evaluate well-diversified portfolios. The three factor portfolios used in an APT model, portfolios 1, 2, and 3, have expected returns E(r1) = 5%, E(r2) = 3%, and E(r3) = 8%. Suppose further that the risk-free rate (λ0) is 2%. Calculate the total return on a well- diversified portfolio with its beta on the first factor, βA1 = 1.1, beta on the second factor, βA2 = .9, and beta on the third factor, βA3 = 1.2.

Assume that both portfolios A and B are well diversified, that E(rA) = 12%, and E(rB) = 9%. If the economy has only one factor, and βA = 1.2, whereas βB = .8, what must be the risk-free rate?