Based on current dividend yields and expected capital gains, the expected rates of return on portfoliosAandBare 7 1 and 8 3 , respectively The beta ofAis 6, while that ofBis 1 5 The T bill rate is currently 4 , while the expected rate of return of the S P 500 index is 8 The standard deviation of portfolioAis 21 annually, while that ofBis 42 , and that of the index is 31 a If you currently hold a market index portfolio, what would be the alpha for PortfoliosAandB (Negative value should be indicated by a minus sign Do not round intermediate calculations Round your answers to 1 decimal place ) PortfolioA PortfolioB b 1 If instead you could investonlyin bills andoneof these portfolios, calculate the sharpe measure for PortfoliosAandB (Round your answers to 2 decimal places ) Sharpe Measure PortfolioA PortfolioB b 2 Which portfolio would you choose Portfolio A Portfolio B

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Question: Based on current dividend yields and expected capital gains, the expected rates of return on portfoliosAandBare 7.1% and 8.3%, respectively. The beta ofAis .6, while

Based on current dividend yields and expected capital gains, the expected rates of return on portfoliosAandBare 7.1% and 8.3%, respectively. The beta ofAis .6, while that ofBis 1.5. The T-bill rate is currently 4%, while the expected rate of return of the S&P 500 index is 8%. The standard deviation of portfolioAis 21% annually, while that ofBis 42%, and that of the index is 31%.

a.	If you currently hold a market index portfolio, what would be the alpha for PortfoliosAandB?(Negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 1 decimal place.)


PortfolioA	%
PortfolioB	%

b-1.	If instead you could investonlyin bills andoneof these portfolios, calculate the sharpe measure for PortfoliosAandB.(Round your answers to 2 decimal places.)

	Sharpe Measure
PortfolioA
PortfolioB

b-2.

Which portfolio would you choose?

Portfolio A

Portfolio B

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