Consider data below resulting from a regression of security returns onto market index reflecting the market model. (15 points)

Security	Alpha	Beta
A	-1.5	1.6
B	3.5	0.7

5.A Calculate alpha and beta of a portfolio consisting in 20 % allocation to security A and 80% allocation to security B. Show the resulting single index model equation or market model equation.

Answer:

Security	Alpha	Beta	Portfolio Alpha	Portfolio Beta
A
B

According to alpha and beta of the portfolio you have calculated, if the market return is 10 % what would be (calculate) return on your portfolio.