Suppose Two Portfolios Have the Same Average Return and the Same

question 12

Multiple Choice

Suppose two portfolios have the same average return and the same standard deviation of returns, but portfolio A has a higher 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 are no data on the alpha of the portfolio.
• E) None of the options are correct.

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Definitions:

Direct Labor

The compensation, such as salaries or wages, given to workers who are directly engaged in producing goods or services.

Manufacturing Costs

Expenses directly related to the production of goods, including raw materials, labor, and overhead.

Prime Costs

The sum of direct materials cost and direct labor cost, representing the primary costs involved in producing a product.

Finished Goods Inventory

The stock of completed products ready for sale but not yet sold, representing a current asset on the balance sheet.