Allison's Portfolio Has an Expected Return of 14% and a Beta

question 6

Multiple Choice

Allison's portfolio has an expected return of 14% and a beta of 1.37. Brianna's portfolio has an expected rate of return of 11% and a beta of 1. The risk- free rate is 3% and the expected rate of return on the market is 12%. According to the Jensen's measure,

• A) The portfolio's are equally desirable.
• B) The answer depends on Allison and Brianna's risk tolerance.
• C) Allison has the better portfolio.
• D) Brianna has the better portfolio.

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Definitions:

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Real estate property leased or rented out to tenants, often as an investment.

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A formula used to determine the amount of tax owed by an individual or business to the government.

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Slope is a measure of the steepness or incline of a line, defined as the ratio of the vertical change to the horizontal change between two points on the line.