Consider the Treynor-Black Model

question 33

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 0.04. The nonsystematic variance of the active portfolio is 0.02. 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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Definitions:

NADH

Nicotinamide adenine dinucleotide (reduced form); a coenzyme involved in redox reactions, carrying electrons from one reaction to another in cellular respiration.

Monosaccharides

The simplest form of carbohydrates, consisting of single sugar molecules like glucose and fructose, serving as fundamental energy sources.

Catabolism

All of the decomposition reactions that occur in the body; releases energy.

Glycolysis

A metabolic process that breaks down glucose to produce energy in the form of ATP.