You Are Comparing Three Assets Which Have Differing Treynor Ratios

question 21

Multiple Choice

You are comparing three assets which have differing Treynor ratios. Given this, which one of the following must be true?

• A)The assets may all be correctly priced if they have differing betas.
• B)The assets have differing rates of return.
• C)The assets have differing levels of market risk but equal amounts of total risk.
• D)The assets are all mispriced according to CAPM.
• E)The preferred investment is the asset with the highest Treynor ratio.

Appreciate the importance of financial statement notes and disclosures.

Identify the role of major regulatory bodies in accounting.

Understand revenue recognition principles.

Grasp the structure of the balance sheet and its elements.

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Definitions:

Frequency of Occurrence

The rate at which a particular event or outcome happens within a specific interval of time or within a given data set.

Chi-square Test for Independence

A statistical method employed to assess if a significant relationship exists between two variables of categorical type.

Degrees of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution, typically defined as the sample size minus the number of parameters estimated.

Contingency Table

A table often used in statistics to display the frequency distribution of variables, showing the number of observations for each combination of categories.