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:

Genes

Units of heredity made up of DNA that influence the development of an organism's traits and are passed from parents to offspring.

Natural Selection

A process in evolutionary biology where organisms better adapted to their environment tend to survive and produce more offspring.

Expressed

Conveyed or made known one's thoughts, feelings, or ideas through words, actions, or art.

Dormant

In a state of temporary inactivity or rest, with the potential to awaken or activate.