Consider the Theory of Active Portfolio Management

question 49

Multiple Choice

Consider the theory of active portfolio management. Shares A and B have the same beta and non-systematic risk. Share A has higher positive alpha 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:

Demand

The desire for specific goods or services accompanied by the ability and readiness to pay for them.

Supply

The total amount of a specific good or service available to consumers, potentially influencing its market price.

Supply Curve

The supply curve is a graphical representation demonstrating the relationship between the price of a good or service and the quantity of that good or service that a supplier is willing and able to supply at those prices.

Business Revenues

The total income received by a company from its sales of goods or services, before any expenses are subtracted.