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  3. 2. consider data resulting from a regression of se

2. Consider data resulting from a regression of security returns on to market index reflecting...

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Question

Accounting

2. Consider data resulting from a regression of security returns on to market index reflecting the market or single index model.

Security

Alpha

Beta

A

2.5

1.6

B

3.5

0.8

2.A. Calculate alpha and beta of a portfolio consisting in 30 % allocation to security A and 70% allocation to security B. Show the resulting single index model equation or market model equation. (15 points)

2.B: According to alpha and Beta of the portfolio you have calculated above in part A, if the market return is 10 % what would be (calculate) return on your portfolio. (10 points)

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