Consider the Theory of Active Portfolio Management

question 1

Multiple Choice

Consider the theory of active portfolio management. Shares A and B have the same positive alpha and the same non-systematic risk. Share A has a higher beta than share B. You should want ________ in your active portfolio.

• A)equal proportions of Shares A and B
• B)more of Share A than Share B
• C)more of Share B than Share A
• D)more information is needed to answer this question

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Definitions:

Investing Activity

Refers to buying and selling long-term assets and other investments, a key part of a company's cash flow statement.

Statement of Cash Flows

An overview presenting the collective cash revenues from a company’s operational efforts and external funding sources, together with all cash disbursements for corporate actions and investments, during a designated period.

Future Cash Payment

Future cash payment refers to the amount of money that is obligated to be paid by an entity in the future for transactions occurring in the present or past.

Unearned Revenues

Money received by a company for a service or product that has yet to be delivered or provided.