# Portfolio Management - Portfolio Management Section 1

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

• A

negative skewness.  • B

positive skewness.  • C

kurtosis.  • Option : A
• Explanation : Stock returns are usually negatively skewed because there is a higher frequency of positive deviations from the mean and most of the distribution is concentrated to the right.

• A

11.67%.  • B

12.00%.  • C

11.33%.  • Option : A
• Explanation : Annualized return is calculated as: (1 + 0.18)12/18 – 1 = 0.1167 = 11.67%.

• A

7.1% and 5.3%.  • B

6.2% and 5.4%.  • C

6.8% and 4.7%.  • Option : C
• Explanation : The real of return and risk premium are calculated as: Real rate of return = [(1 + 0.1) / (1 + 0.03)] - 1 = 6.8% Risk Premium = [(1 + 0.068) / (1 + 0.02)] - 1 = 4.7%

• A

Sequentially larger increases in expected return.  • B

Consistent increases in expected return.  • C

Sequentially smaller increases in expected return.  • Option : C
• Explanation : As one moves from left to right along an efficient frontier, the increase in return with every unit increase in risk keeps decreasing because the slope of the efficient frontier continues to decrease.

• Option : B
• Explanation : Since Investor A only invests in risky assets, the highest return for a given level of risk is indicated by the efficient frontier. Investor B invests in the risk free asset as well. For him, the highest return for a given level of risk is indicated by the capital allocation line (CAL).