Consider the Treynor-Black Model

question 3

Multiple Choice

Consider the Treynor-Black model.The alpha of an active portfolio is 2%.The expected return on the market index is 12%.The variance of the return on the market portfolio is 4%.The nonsystematic variance of the active portfolio is 2%.The risk-free rate of return is 3%.The beta of the active portfolio is 1.15.The optimal proportion to invest in the active portfolio is

• A)48.7%.
• B)98.3%.
• C)47.6%.
• D)100.0%.

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Definitions:

Markets for Goods

Platforms or venues where goods and services are exchanged between buyers and sellers, determining the prices through the laws of supply and demand.

Households

Units consisting of one or more people living in the same dwelling and sharing meals or living accommodation; they can also be considered as basic units in society for consumption, production, and decision-making.

Firms

Business organizations, such as corporations or partnerships, engaged in commercial, industrial, or professional activities.

Markets for Goods

Platforms or mediums where goods and services are exchanged between buyers and sellers.