Allison's Portfolio Has a Beta of 1

question 82

Multiple Choice

Allison's portfolio has a beta of 1.37 and earns a return of 14%. Brianna's portfolio has a beta of 0.8 and earns a return of 11%. The risk-free rate is 3% and the expected rate of return on the market is 12%. According to the Jensen's measure,

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

---

Definitions:

Psychology

The scientific study of the mind and behavior, encompassing various aspects of conscious and unconscious experience as well as thought.

Behavior

The variety of behaviors and gestures exhibited by people, organisms, systems, or synthetic entities in response to one another or their surroundings.

Structuralism

An approach in psychology that analyzes mental structures by breaking down mental processes into their basic components.

Introspection

A method of self-observation in which individuals examine their own thoughts and feelings.