Suppose Two Portfolios Have the Same Average Return and the Same

question 70

Multiple Choice

Suppose two portfolios have the same average return and the same standard deviation of returns, but Aggie Fund has a lower beta than Raider Fund. According to the Treynor measure, the performance of Aggie Fund

• A) is better than the performance of Raider Fund.
• B) is the same as the performance of Raider Fund.
• C) is poorer than the performance of Raider Fund.
• D) cannot be measured as there are no data on the alpha of the portfolio.

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Definitions:

Capacity

The maximum output or producing ability of a facility, machine, firm, or economy.

Reaction Function

A concept in game theory and economics that specifies how one player's strategy changes in response to the strategy of another player.

Demand Function

An illustrative model that displays the amount of a product buyers are prepared and capable of buying at different price levels.

Pumpkins

A plant belonging to the squash family, often used for food, decoration, or as commodities in agricultural markets.