# Portfolio Management - Portfolio Management Section 1

>>>>>>>>Portfolio Management Section 1

• A

a higher level of risk aversion.  • B

a lower level of risk aversion.  • C

the same level of risk aversion.  • Option : B
• Explanation : An investor with less steep indifference curves has a lower level of risk aversion.

• A

Yes.  • B

No, since investor Y has low risk tolerance.  • C

No, since investor Y has high risk tolerance.  • Option : A
• Explanation : Investor Y has a low risk aversion coefficient, therefore a high risk tolerance and a higher expected return on the capital allocation line.

• A

borrowing rate.  • B

risk-free rate.  • C

risk preference.  • Option : C
• Explanation : Each individual investor’s optimal mix of the risk-free asset and the optimal risky asset is determined by the investor’s risk preference.

• A

3.77%.  • B

-4.59%.  • C

-5.12%.  • Option : B
• Explanation : The geometric mean return for the fund for the past three years is calculated as: [(1 + 18%) (1 + 15%) (1 - 36%)]1/3 - 1 = - 0.0459 = - 4.59%.

• A

22.62%.  • B

14.19%.  • C

35.81%.  • Option : A
• Explanation : Annualized return is calculated as: (1 + 0.04)52/10 – 1 = 0.2262 = 22.62%.