C. Miko is actively managing a portfolio. The portfolio has beta equal to 0.8, expected return of 9% and total variance

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C Miko Is Actively Managing A Portfolio The Portfolio Has Beta Equal To 0 8 Expected Return Of 9 And Total Variance 1 (29.3 KiB) Viewed 30 times

C. Miko is actively managing a portfolio. The portfolio has beta equal to 0.8, expected return of 9% and total variance of 15%. Miko wants to add the market index to her portfolio. The average return premium and the retum variance of the market Index are 5% and 10%, respectively. The risk-free rate is 1%. What proportion of the total investment, according to the Treynor-Black model, should be placed in the portfolio and in the market index? The weight of the active portfolio according to the. Treynor-Black model is given by 4(1-Bo) + [E(Tu) - 71(0)63 Where do = Jensen's alpha of the portfolio Bp = portfolio beta E(TM) = the average return on the market index ft = risk-free rate = idiosyncratic variance of the portfolio on = total return variance of the market index (9 marks)