Answer: 0.87

## Explanation We can rearrange the Jensen's alpha formula to solve for beta: \[ \alpha = R_p - [R_f + \beta (R_m - R_f)] \] Given: - \( \alpha \) = Jensen's alpha = 4.75% - \( R_p \) = Actual portfolio return = 14.2% - \( R_f \) = Risk-free rate = 4.25% - \( R_m - R_f \) = Market risk premium = 6% **Rearranging the formula:** \[ \alpha = R_p - R_f - \beta (R_m - R_f) \] \[ \beta (R_m - R_f) = R_p - R_f - \alpha \] \[ \beta = \frac{R_p - R_f - \alpha}{R_m - R_f} \] **Calculation:** \[ \beta = \frac{14.2\% - 4.25\% - 4.75\%}{6\%} \] \[ \beta = \frac{5.2\%}{6\%} \] \[ \beta = 0.8667 \] Rounded to two decimal places, the beta is **0.87**, which corresponds to option B.

Author: LeetQuiz Editorial Team