Suppose That Over the Same Time Period Two Portfolios Have

question 22

Multiple Choice

Suppose that over the same time period two portfolios have the same average return and the same standard deviation of return,but portfolio A has a higher beta than portfolio B. According to the Sharpe 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 since there is no data on the alpha of the portfolio

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Definitions:

Present Investment

Present investment refers to the current amount of money allocated for particular assets or projects, focusing on capital allocation and potential returns.

Total Cost Approach

The total cost approach is an assessment method that considers all possible costs related to a product or project, including direct, indirect, fixed, and variable costs.

Discount Rate

The discount rate is the interest rate used in discounted cash flow analysis to determine the present value of future cash flows.

Salvage Value

The predicted remaining value of an asset at the termination of its functional life.