Consider the Treynor-Black Model

question 5

Multiple Choice

Consider the Treynor-Black model. The alpha of an active portfolio is 1%. The expected return on the market index is 16%. The variance of the return on the market portfolio is 4%. The nonsystematic variance of the active portfolio is 1%. The risk-free rate of return is 8%. The beta of the active portfolio is 1.05. The optimal proportion to invest in the active portfolio is

• A) 48.7%.
• B) 50.0%.
• C) 51.3%.
• D) 100.0%.

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Definitions:

Developmental Permanence

The concept that certain developmental milestones or effects, once achieved or established, will remain stable over time.

Sensory Store

A component of memory that briefly holds incoming sensory information from the environment, allowing the brain to process it.

Three-System Model

A psychological framework that divides the cognitive processes into three systems: the behavioral, cognitive, and emotional systems.

Information Processing Approach

A cognitive psychology theory that likens human thinking to the operation of a computer, focusing on how information is received, processed, stored, and retrieved.