Consider the Treynor-Black Model

question 43

Multiple Choice

Consider the Treynor-Black model.The alpha of an active portfolio is 1%.The expected return on the market index is 16%.The variance of the return on the market portfolio is 4%.The nonsystematic variance of the active portfolio is 1%.The risk-free rate of return is 8%.The beta of the active portfolio is 1.05.The optimal proportion to invest in the active portfolio is __________.

• A)48.7%
• B)50.0%
• C)51.3%
• D)100.0%
• E)none of the above

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Definitions:

Loneliness

A complex and usually unpleasant emotional response to isolation or lack of companionship, often involving feelings of disconnectedness or social disengagement.

Social Loafing

The inclination of people to put in less effort when they are part of a group compared to when they work solo.

Interpersonal Glue

The emotional or social bonds that hold group members together, fostering unity and cooperation.

Homogeneous Groups

Teams or groups composed of members who share similar characteristics, backgrounds, or attributes, leading to uniformity in perspectives.