Suppose Two Portfolios Have the Same Average Return,the Same Standard

question 8

Multiple Choice

Suppose two portfolios have the same average return,the same standard deviation of returns,but portfolio A has a lower beta than portfolio B.According to the Treynor measure,the performance of portfolio A __________.

• A)is better than the performance of portfolio B
• B)is the same as the performance of portfolio B
• C)is poorer than the performance of portfolio B
• D)cannot be measured as there is no data on the alpha of the portfolio
• E)none of the above is true.

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Definitions:

Return on Investment

A financial ratio used to evaluate the efficiency or profitability of an investment, calculated by dividing the benefit (return) of an investment by the cost of the investment.

Investment Centres

Business segments or units within an organization that are responsible for their own revenues, expenses, and asset investments.

Performance Evaluation

The systematic assessment of an employee, process, or organization's performance, usually against set objectives or criteria.

Return on Equity

A measure of financial performance calculated by dividing net income by shareholder equity, indicating how efficiently a company uses its equity to generate profit.