Portfolio Management - Portfolio Management Section 1
| Investor | Expected Annual Return (%) | Expected Standard Deviation (%) | Correlation between the security and the market |
| Bill | 15 | 21 | 0.85 |
| Jill | 12 | 21 | 0.75 |
| Mill | 12 | 28 | 0.65 |
The following information is available for the market:Expected Annual Return:11%
Expected Standard Deviation: 16%
Which investor is most likely to be exposed to the highest total risk?
Expected Standard Deviation: 16%
Which investor is most likely to be exposed to the highest total risk?
- Option : C
- Explanation : The highest total risk is calculated based on the highest total variance. Bill: 0.21² = 0.0441 Jill: 0.21² = 0.0441 Mill: 0.28² = 0.0784 Thus Mill is exposed to the highest total risk.
| Investor | Expected Annual Return(%) | Expected Standard Deviation(%) | Correlation between the security and the market |
| Bill | 15 | 21 | 0.85 |
| Jill | 12 | 21 | 0.75 |
| Mill | 12 | 28 | 0.65 |
The following information is available for the market: Expected Annual Return: 11%
Expected Standard Deviation: 16% Which investor has invested in a security with the highest beta?
Expected Standard Deviation: 16% Which investor has invested in a security with the highest beta?
| Investor | Expected Annual Return(%) | Expected Standard Deviation(%) | Correlation between the security and the market |
| Bill | 15 | 21 | 0.85 |
| Jill | 12 | 21 | 0.75 |
| Mill | 12 | 28 | 0.65 |
The following information is available for the market: Expected Annual Return: 11%
Expected Standard Deviation: 16% Which investor is exposed to the least amount of market risk?
Expected Standard Deviation: 16% Which investor is exposed to the least amount of market risk?
50. A security characteristic line’s slope is most likely to be the asset’s:
- Option : C
- Explanation : The excess return of the security on the excess return of the market is plotted on a security characteristic line. The slope of this line is the beta, and the intercept is the Jensen’s alpha
