Based on current dividend yields and expected capital gains, the expected rates of return on portfolios a and b are 12% and 16%, respectively.
the beta of a is 0.7, while that of b is 1.4. the t-bill rate is currently 5%, whereas the expected rate of return of the s& p 500 index is 13%. the standard deviation of portfolio a is 12% annually, that of bis 31%, and that of the s& p 500 index is 18%.a. calculate the alphas for the two portfolios. (round your answers to 1 decimal place.)b. if you could invest only in t-bills and one of these portfolios, which would you chose?
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