Assume that the economy has three types of people. 20% are fadfollowers, 75% are passiveinvestors, and5% are
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Question:
Assume that the economy has three types of people. 20% are fadfollowers, 75% are passiveinvestors, and5% are informed traders. The portfolio consisting of all informed traders has a beta of 1.4 and an expected return of16%. The market has an expected return of10% and the risk free rate is4%.
The alpha for the informed investors is closestto:
A.
0.0%
B.
0.9%
C.
2.4%
D.
3.6%
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