You are given the following estimates of Stock A and Stock B Stock A Stock B Actual E[R] VAR[R;] 0.0518
You are given the following estimates of Stock A and Stock B where the actual E[R] is the expected return estimated as the expected price in one year divided by the current price (neither stock pays dividends). The expected return on the market is 8% and its variance is 0.0497. The risk-free rate is 5%.
Consider an equal-weighted portfolio P invested in A and B. According to the CAPM, what is the alpha of P?