Assume Portfolio a and Portfolio B Are Well-Diversified; However, Portfolio

question 52

Multiple Choice

Assume Portfolio A and Portfolio B are well-diversified; however, Portfolio A has a higher standard deviation than Portfolio B. Based on this information, the Sharpe ratio will give Portfolio A:

• A) the higher rank, and the Treynor ratio will give Portfolio B the higher rank.
• B) the lower rank, and the Treynor ratio will give Portfolio B the lower rank.
• C) the same rank as the rank assigned by the Treynor ratio.
• D) a rank that varies directly based on the overall market risk.

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Definitions:

Capital Stock

The total amount of a company's shares of stock, representing ownership in the company.

Records Expense

The act of documenting or entering an expense into the accounting system to reflect its impact on the financial statements.

Obligation

A formal commitment or requirement to do something, often financial in nature, such as repaying a loan or fulfilling a contractual agreement.

Chart Of Accounts

A listing of all the accounts in the general ledger, each with a unique account number.