
Concept explainers
To compute: Beta and construct a tabulated summary.
Introduction: The model that shows the relation between systematic risk and expected

Explanation of Solution
Security market line: SML refers to a line that represents CAPM (capital asset pricing model), which further shows the level of systematic, or market, risks for various securities against the expected return of the market at a stated point of time.
Regression can be applied to excess return to evaluate beta for each portfolio. It has been shown below:
Beta of Stock A: -0.4707
Beta of Stock B: 0.5945
Beta of Stock C: 0.4172
Beta of Stock D: 1.3799
Beta of Stock E: 0.9018
Beta of Stock F: 1.7769
Beta of Stock G: 0.6638
Beta of Stock H: 1.9119
Beta of Stock I: 2.0819
Tabulated summary has been constructed below:
Stock | Beta |
A | -0.47072 |
B | 0.59447 |
C | 0.41722 |
D | 1.37988 |
E | 0.90179 |
F | 1.77688 |
G | 0.66377 |
H | 1.91194 |
I | 2.08192 |
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- Chee Chew's portfolio has a beta of 1.27 and earned a return of 13.6% during the year just ended. The risk-free rate is currently 4.6%. The return on the market portfolio during the year just ended was 10.5%. a. Calculate Jensen's measure (Jensen's alpha) for Chee's portfolio for the year just ended. b. Compare the performance of Chee's portfolio found in part a to that of Carri Uhl's portfolio, which has a Jensen's measure of -0.25. Which portfolio performed better? Explain. c. Use your findings in part a to discuss the performance of Chee's portfolio during the period just ended.arrow_forwardDuring the year just ended, Anna Schultz's portfolio, which has a beta of 0.91, earned a return of 8.1%. The risk-free rate is currently 4.1%, and the return on the market portfolio during the year just ended was 9.4%. a. Calculate Treynor's measure for Anna's portfolio for the year just ended. b. Compare the performance of Anna's portfolio found in part a to that of Stacey Quant's portfolio, which has a Treynor's measure of 1.39%. Which portfolio performed better? Explain. c. Calculate Treynor's measure for the market portfolio for the year just ended. d. Use your findings in parts a and c to discuss the performance of Anna's portfolio relative to the market during the year just ended.arrow_forwardNeed answer.arrow_forward
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