Income Is a Poor Measure of Relative Position When Attempting

question 26

Multiple Choice

Income is a poor measure of relative position when attempting to determine horizontal equity.

• A) True
• B) False
• C) Uncertain

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Definitions:

Bogey Portfolio

An investment portfolio used as a benchmark to measure the performance of other portfolios.

Treynor Measure

A performance metric for determining how well an investment compensates the investor for risk taken, excluding unsystematic risk.

Risk-Free Return

The return on investment with no risk of financial loss, often represented by the yield on government securities.

Sharpe's Measure

A ratio used to evaluate the risk-adjusted return of an investment, comparing its excess return over the risk-free rate to its standard deviation of returns.