Consider the Treynor-Black Model

question 44

Multiple Choice

Consider the Treynor-Black model.The alpha of an active portfolio is 1%.The expected return on the market index is 16%.The variance of the return on the market portfolio is 4%.The nonsystematic variance of the active portfolio is 1%.The risk-free rate of return is 8%.The beta of the active portfolio is 1.05.The optimal proportion to invest in the active portfolio is _________.

• A) 48.7%
• B) 50.0%
• C) 51.3%
• D) 100.0%
• E) none of these

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Definitions:

Psychosomatic Illnesses

Conditions in which psychological factors significantly affect physiological outcomes, manifesting in physical symptoms and diseases.

Neurotics

Individuals who experience a higher than average level of emotional distress or are prone to suffer from some type of neurosis.

Specific Object

An item or thing that is distinctly identified or defined.

Anxiety

A feeling of worry, nervousness, or unease about something with an uncertain outcome, often related to imminent events or something with an unpredictable result.