To Determine the Optimal Risky Portfolio in the Treynor-Black Model

question 19

Multiple Choice

To determine the optimal risky portfolio in the Treynor-Black model, macroeconomic forecasts are used for the _________, and composite forecasts are used for the __________.

• A) passive index portfolio; active portfolio
• B) active portfolio, passive index portfolio
• C) expected return; standard deviation
• D) expected return ; beta coefficient
• E) alpha coefficient; beta coefficient

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Definitions:

Net Operating Income

A company's revenue minus its operating expenses, not including taxes and interest charges, representing the profit from core business operations.

Price

Refers to the monetary value assigned to a product or service, indicating what a buyer must pay to obtain it.

Target Costing

A cost management strategy whereby a product’s selling price is considered in designing and developing a product, with an intent to manage costs and maintain profitability.

Desired Return

The minimum return that an investor, project, or business aims to achieve from an investment or venture, factoring in risk and opportunity cost.