Consider the Treynor-Black Model

Multiple Choice

Consider the Treynor-Black model. The alpha of an active portfolio is 3%. The expected return on the market index is 10%. The variance of the return on the market portfolio is 4%. The nonsystematic variance of the active
Portfolio is 2%. The risk-free rate of return is 3%. The beta of the active portfolio is 1.15. The optimal proportion
To invest in the active portfolio is

A) 48.7%.
B) 98.4%.
C) 51.3%.
D) 100.0%.