CAS Exam 9 Spring 2016, Question 4
Study guide: Exam 9
Given the following information under the single index model:
- Portfolio A's
\alpha = 2\%. - Portfolio A's
\beta = 1.25.
Part a (0.5 points)
Construct a tracking portfolio that matches the systematic component of portfolio A's return.
Part b (0.5 points)
Demonstrate how to use the tracking portfolio above to earn a positive excess return with no exposure to systematic risk.
No current syllabus covers this question; it is kept for the record.
Answer this question and see the worked solution