Kane,Marcus,and Trippi (1999)show that the annualized fee that investors should be willing to pay for active management,over and above the fee charged by a passive index fund,does not depend on
I.the investor's coefficient of risk aversion
II.the value of at-the-money call option on the market portfolio
III.the value of out-of-the-money call option on the market portfolio
IV.the precision of the security analyst
V.the distribution of the squared information ratio of in the universe of securities
A)I, II, IV
B)II, III, V
C)II, III
D)I, IV, V
E)II,IV,V

Question

Quizplus · Accepted Answer

The annualized fee for active management does not depend on the value of at-the-money or out-of-the-money call options on the market portfolio, as these are not directly related to the active management's ability to generate excess returns.

Kane,Marcus,and Trippi (1999)show That the Annualized Fee That Investors Should