alleryStart learning →A fund returns 16%, risk-free rate 6%, market 14%, beta 1.2. What is Jensen's alpha?
A2.0%
B0.4%
C1.6%
D-0.4%
Answer & Solution
Correct answer: B. 0.4%
CAPM return is 6 plus 1.2 times 8 equals 15.6, so alpha is 16 minus 15.6 equals 0.4%.
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