Consider the Theory of Active Portfolio Management

question 67

Multiple Choice

Consider the theory of active portfolio management.Stocks A and B have the same beta and the same positive alpha.Stock A has higher nonsystematic risk than stock B. You should want __________ in your active portfolio.

• A) equal proportions of stocks A and B
• B) more of stock A than stock B
• C) more of stock B than stock A
• D) more information is needed to answer this question

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Definitions:

Preferred Mix

The optimal combination of goods and services an economy should produce, taking into account consumer preferences, resource availability, and socio-economic objectives.

Venture Capital

Financing provided by investors to startup companies and small businesses with perceived long-term growth potential.

Retained Earnings

The portion of a company's profits not paid out as dividends, but reinvested in the business.

Total Utility

The complete satisfaction or fulfillment a person derives from consuming a certain quantity of goods or services.