Q. The alpha of an active portfolio is 1%. The expected return on the market index is 16%. The variance of the return on the market portfolio is 4%. The nonsystematic variance of the active portfolio is 1%. The risk-free rate of return is 8%. The beta of the active portfolio is 1.05. The optimal proportion to invest in the active portfolio is __________. (Solved)

1. 48.7%

2. 50.0%

3. 51.3%

4. 100.0%

  • c. 51.3%
Subscribe Now

Get All Updates & News