Consider the Treynor-Black Model

question 10

Multiple Choice

Consider the Treynor-Black model.The alpha of an active portfolio is 1%.The expected return on the market index is 11%.The variance of return on the market portfolio is 6%.The nonsystematic variance of the active portfolio is 2%.The risk-free rate of return is 4%.The beta of the active portfolio is 1.1.The optimal proportion to invest in the active portfolio is

• A)45%.
• B)25%.
• C)50%.
• D)100%.