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:

Abnormal Behavior

Patterns of emotion, thought, or action deemed pathological for one of several reasons, including statistical rarity, violation of norms, or personal distress.

Operant Conditioning

A form of associative learning in which the consequences of a behavior change the probability of the behavior’s occurrence.

Organic Causes

refers to physical or biological factors that lead to medical conditions, as opposed to psychological or environmental factors.

Self-Esteem

The subjective evaluation of one's own worth, including feelings of confidence and respect for oneself.