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CAPm required return on portfolio

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Investment

Mark averaged a 20% return with a portfolio beta 1,5 and John averaged a 15% return with a portfolio beta 1,2. The t bill rate was 5% and the market return was 13%

Which is better?

a. Mark because he generated a larger alpha
b. John because he generated a larger alpha
c. Mark because he generated a higher return
d. John because he achieved a good return with a lower beta
e. None of the above

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Solution Summary

CAPm required return on portfolio is assessed.

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Using CAPm required return on portfolio
Rp=Rf+Beta*(Rm-Rf)
Rm=13%, Rf=5%

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