Consider the Treynor-Black Model

question 25

Multiple Choice

Consider the Treynor-Black model. The alpha of an active portfolio is 3%. The expected return on the market index is 18%. The standard deviation of the return on the market portfolio is 25%. The nonsystematic standard deviation of the active portfolio is 15%. The risk-free rate of return is 6%. The beta of the active portfolio is 1.2. The optimal proportion to invest in the active portfolio is

• A) 50.0%.
• B) 69.4%.
• C) 72.3%.
• D) 80.6%.
• E) 100.0%.

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