Zack is using the Treynor and Black optimisation method. He has determined that the optimal weighting in the active portfolio is 76.19%. The active portfolio has a residual standard deviation of 5% and an alpha of 1.45%. The standard deviation of the market return is 12%. The risk-free rate is 0.5%. The active portfolio has a beta of one. (a) Calculate the expected return of the market portfolio. (3 marks)

 (b) Calculate the standard deviation of the active portfolio. 

Answer rating: 100% (QA)

To solve this problem we will use the Treynor and Black optimization method Given information Optima... View the full answer