INV2 P1 3 You are considering an investment in a portfolio P with the following expected returns in three different states of nature: Recession Steady Expansion Probability 0.10 0.55 0.35 Return on P...

INV2 P1 3

You are considering an investment in a portfolio P with the following expected returns in three different states of nature:

The risk-free rate is currently 4%, and the market portfolio M has an expected return of 16% and standard deviation of 20%, and its correlation with P is .7.

Does portfolio P have a positive or negative alpha relative to its required return given its level of risk?