Suppose the Expected Return for the Market Portfolio and Risk-Free

question 18

Multiple Choice

Suppose the expected return for the market portfolio and risk-free rate are 13 percent and 3 percent respectively. Stocks A, B, and C have Treynor measures of 0.24, 0.16, and 0.11, respectively. Based on this information, an investor should

• A) buy stocks A, B, and C.
• B) buy stocks A and B and sell stock C.
• C) buy stock A and sell stocks B and C.
• D) sell stocks A, B, and C.
• E) hold stocks A, B, and C.

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Definitions:

Internal Tension

Psychological stress or discomfort that arises from conflicting beliefs, thoughts, or feelings within oneself.

Unmet Biological Needs

Basic physiological requirements including food, water, shelter, and warmth that are not adequately satisfied, impacting overall health and well-being.

Incentive

Something that motivates or encourages an individual to do something or to achieve a goal.

Environmental Stimulus

Any external event or factor that influences an organism's behavior or physiological responses.