Suppose a portfolio manager has the following information on a well-diversified portfolio:
1. the risk-free rate is estimated at 2.2%;
2. The return on a market portfolio is estimated at 5.0%;
3. The expected return on this portfolio is 6%.
a. Calculate the alpha according the CAPM.
Alpha %
b. To construct an arbitrage portfolio, what are the weights on the following assets.
Porfolio P_________ %; Market Porfolio__________ %; Risk-free Assets_________ %