Suppose Two Portfolios Have the Same Average Return and the Same

question 14

Multiple Choice

Suppose two portfolios have the same average return and the same standard deviation of returns, but Buckeye Fund has a higher beta than Wild Cat Fund. According to the Treynor measure, the performance of Buckeye Fund

• A) is better than the performance of Wild Cat Fund.
• B) is the same as the performance of Wild Cat Fund.
• C) is poorer than the performance of Wild Cat Fund.
• D) cannot be measured as there are no data on the alpha of the portfolio.
• E) None of the options are correct.

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Definitions:

Free Trade

An economic policy of not discriminating against imports from and exports to foreign jurisdictions, allowing goods to move freely across borders.

Floating Exchange Rate

A currency valuation system that allows the value of the currency to fluctuate according to the foreign exchange market.

World War II

A global conflict that took place from 1939 to 1945, involving most of the world's nations, including all of the great powers, eventually forming two opposing military alliances: the Allies and the Axis.

Indirect Quote

A way of expressing the foreign exchange rate as the amount of foreign currency required to buy or sell one unit of the domestic currency.