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:

Repressed Thoughts

Unconscious defense mechanisms where distressing thoughts and memories are blocked from conscious awareness.

Undeveloped Ideas

Concepts or thoughts that have not been fully thought out, explored, or expanded upon to reach their potential understanding or application.

Oedipus Conflict

A psychoanalytic theory, proposed by Freud, which suggests a child feels desire for the opposite-sex parent and jealousy and rivalry toward their same-sex parent.

Electra Conflict

A concept in psychoanalytic theory suggesting a girl's psychosexual competition with her mother for possession of her father.