# Portfolio Management - Portfolio Management Section 2

>>>>>>>>>>Portfolio Management Section 2

• Option : B
• Explanation : Jensen’s alpha = return that was actually achieved – expected return based on CAPM = 0.10 – [0.04 + 0.5 (0.07 – 0.04)] = 0.045 or 4.5%.

 Return Risk Market 9.50% 17.50% Portfolio 15.50% 23.20%

• Option : A
• Explanation : M2 = (Rp − Rf) ∗ ( σm ) − (Rm − Rf)

• Option : C
• Explanation : Since George aims to maximize risk-adjusted returns, securities with a higher Jensen’s alpha should have a greater weight in the portfolio.

• Option : C
• Explanation : M-squared and Sharpe ratio adjust for total risk, whereas Jensen’s alpha adjusts for systematic risk.

• Option : A
• Explanation : Jensen’s alpha is based on systematic risk and does not require a comparison. M-squared is based on total risk (not systematic risk). The Treynor ratio is based on systematic risk but requires a comparison.

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