You Are Comparing Three Assets Which Have Differing Treynor Ratios

question 21

Multiple Choice

You are comparing three assets which have differing Treynor ratios. Given this, which one of the following must be true?

• A)The assets may all be correctly priced if they have differing betas.
• B)The assets have differing rates of return.
• C)The assets have differing levels of market risk but equal amounts of total risk.
• D)The assets are all mispriced according to CAPM.
• E)The preferred investment is the asset with the highest Treynor ratio.

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Definitions:

Inventory Figure

The total value of a company's merchandise, raw materials, and finished and unfinished products which have not yet been sold.

Financial Position

Financial position is the status of a person's or entity's assets, liabilities, and equity at a given point in time, providing a snapshot of financial health.

Financial Position Valuations

Assessments that determine the value of a company's assets, liabilities, and equity at a particular time, reflecting its financial health.