Consider the Treynor-Black Model

question 15

Multiple Choice

Consider the Treynor-Black model.The alpha of an active portfolio is 3%.The expected return on the market index is 10%.The variance of the return on the market portfolio is 4%.The nonsystematic variance of the active portfolio is 2%.The risk-free rate of return is 3%.The beta of the active portfolio is 1.15.The optimal proportion to invest in the active portfolio is

• A)48.7%.
• B)98.4%.
• C)51.3%.
• D)100.0%.

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