Allison's Portfolio Has an Expected Return of 14% and a Beta

question 61

Multiple Choice

Allison's portfolio has an expected return of 14% and a beta of 1.37.Brianna's portfolio has an expected rate of return of 11% and a beta of 1.The risk-free rate is 3%.According to the Treynor measure,

• A)Allison has the better portfolio.
• B)Brianna has the better portfolio.
• C)the portfolio's are equally desirable.
• D)the answer depends on Allison and Brianna's risk tolerance.

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Definitions:

Direct Labor

Labor that is directly involved in the creation or production of goods, distinguishable from indirect labor such as administrative work.

Raw Material

The basic material from which a product is made, often used in manufacturing and production processes.

Labor Efficiency Variance

The difference between the actual hours of labor worked and the expected (or standard) hours, multiplied by the standard hourly labor rate.

Direct Labor

The cost of wage-earning employees who are directly involved in the production of goods or services, such as assembly line workers.