Exhibit 8.6 Use the Information Below for the Following Problem(S)

question 48

Multiple Choice

Exhibit 8.6
Use the Information Below for the Following Problem(S)
Jonathan Crowley is a portfolio manager for a large pension fund. Last year his portfolio had an actual return of 12.6% with a standard deviation of 13% and a beta of 1.3. The market risk premium for this period of time was 6% and the risk-free rate of return was 5%.
-Refer to Exhibit 8.6.How does Jonathan Crowley's portfolio compare to the market portfolio?

• A) Crowley's portfolio is less risky than the market portfolio.
• B) Crowley's portfolio significantly outperformed the market portfolio.
• C) On a risk-adjusted basis Crowley's portfolio performed similar to the market portfolio.
• D) On a risk-adjusted basis Crowley's portfolio significantly underperformed the market.
• E) On a risk-adjusted basis Crowley's portfolio significantly outperformed the market.

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Definitions:

Market Price

The price at which a product or service is traded in the open market.

ATC

Average Total Cost, which is the total cost per unit of output produced, calculated by dividing the total cost by the quantity of output.

MR

Marginal Revenue, which is the additional income from selling one more unit of a good or service.

Profit-Maximizing

The process of increasing the financial gain of an entity as much as possible through various strategies and decisions.