Suppose Two Portfolios Have the Same Average Return and the Same

question 3

Multiple Choice

Suppose two portfolios have the same average return and the same standard deviation of returns, but Roll Tide Fund has a higher beta than Arc Fund. According to the Sharpe measure, the performance of Roll Tide Fund

• A) is better than the performance of Arc Fund.
• B) is the same as the performance of Arc Fund.
• C) is poorer than the performance of Arc Fund.
• D) cannot be measured as there are no data on the alpha of the portfolio.

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Definitions:

Competitive Market

A market structure characterized by a large number of buyers and sellers, where no single entity can influence the market price.

Positive Profits

Financial gains that exceed the costs and expenditures incurred in generating revenue.

Demand Fluctuates

The variability in consumer desire to purchase goods or services over time, often affected by seasons, trends, or economic conditions.

Stocks

Shares of ownership in a company that represent a claim on the company's earnings and assets.