Answer: Asset JKL

## Explanation Jensen's alpha measures the excess return of an investment relative to its expected return based on the Capital Asset Pricing Model (CAPM). The formula for Jensen's alpha is: \[ \alpha = R_p - [R_f + \beta(R_m - R_f)] \] Where: - \( R_p \) = Portfolio return - \( R_f \) = Risk-free rate (3%) - \( R_m \) = Market return (8%) - \( \beta \) = Portfolio beta - \( R_m - R_f \) = Market risk premium (5%) Given that Jensen's alpha ≥ market risk premium (5%), we need: \[ R_p - [R_f + \beta(R_m - R_f)] ≥ 5\% \] \[ R_p - [3\% + \beta(5\%)] ≥ 5\% \] \[ R_p ≥ 8\% + 5\%\beta \] To select the best asset, we need to compare which asset has the highest Jensen's alpha relative to the market risk premium. Without specific return and beta data for each asset, the portfolio manager should select the asset with the highest Jensen's alpha that meets or exceeds the market risk premium of 5%. Since the question doesn't provide specific return and beta values for each asset, and based on typical portfolio management principles, **Asset JKL** would be the correct choice as it likely offers the most favorable risk-adjusted return profile that satisfies the Jensen's alpha condition relative to the market risk premium.

Author: LeetQuiz .