Solved: What is the alpha of the two funds, Finance Basics

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What is the alpha of the two funds

Problem: You can invest in two funds A and B with the following characteristics:

Fund    E(R)    Beta
A      12%    0.90
B        18%    1.50

The riskfree return is 5%. The market risk premium is 8%. The standard deviation of the market return is 20%. The two funds have no non-systematic risk. (Show your work)

Q1) What is the alpha of the two funds?

Q2) What is the standard deviation of the two funds?

Q3) What is the correlation of the two funds?

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Finance Basics: What is the alpha of the two funds

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