Alpha is the excess return generated by the portfolio when compared to the return expected using the Capital Asset Pricing Model (CAPM).

As per the CAPM, the expected return of the portfolio is computed by the following expression:

$$R_p = R_f + \beta(R_m - R_f)$$ $$R_p = 6\% + 1.15 * (25\% - 6\%)$$ $$R_p = 6\% + 1.15 * 19\% = 27.85\%$$

Expected return from the market:

$$R_m = 6\% + 1 * (25\% - 6\%) = 25\%$$

Therefore, the alpha (or the excess return):

$$\alpha = R_{\text{average}} - R_{\text{CAPM}}$$ $$\alpha_{\text{portfolio}} = 32\% - 27.85\% = 4.15\%$$ $$\alpha_{\text{market}} = 25\% - 25\% = 0$$