Morgan Stock Has an Average Return Minus the Average Risk-Free

question 31

Multiple Choice

Morgan stock has an average return minus the average risk-free rate of 12.5 percent, a beta of 2.5, and a standard deviation of returns of 20 percent. The Treynor index of Morgan stock is

• A) 0.0625.
• B) 0.05.
• C) 0.35.
• D) 0.03.
• E) none of the above

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Definitions:

ERISA

The Employee Retirement Income Security Act of 1974, a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry.

Pension Reform Act

Legislation aimed at improving the management and sustainability of pension funds.

Funding Agency

An organization that provides financial support for various projects or programs, often within the public or nonprofit sector.

GAAP

Generally Accepted Accounting Principles, the standard framework of guidelines for financial accounting used in any given jurisdiction, notably in the United States.