Appraisal ratio of the combined portfolio

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1) XRCO has a beta of 1.7. The annualized market return over the last year was 13% and the risk-free rate over the same period was 3%. You also observed that XRCO had an annualized return of 20%. Assuming that markets are efficient, this suggests that bad news about XRCO was announced over the period.

True or False? (why?)

2) Portfolio P has an appraisal ratio of 0.8. If an investor puts half their money into P and half into a market index fund, the appraisal ratio of the combined portfolio will be 0.4.

True or False? (why?)

Reference no: EM132816536

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