Consider the Treynor-Black Model

question 2

Multiple Choice

Consider the Treynor-Black model. The alpha of an active portfolio is 2%. The expected return on the market index is 12%. 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) 98.3%.
• C) 47.6%.
• D) 100.0%.

---

Definitions:

Internal Needs

Fundamental psychological or physiological necessities that drive behavior and must be met for an individual to achieve well-being.

Growth Needs

Psychological needs that drive an individual to seek out new challenges, personal development, and opportunities for growth.

Maslow's Theory

A psychological theory proposing a hierarchy of human needs, from basic physiological needs to self-actualization.

Nature

The intrinsic physical and biological factors that shape the environment and influence the survival and behavior of organisms.