116 Correct answer is D “An Introduction to Portfolio Management,” Frank K. Reilly and Keith C. Brown
2008 Modular Level I, Vol. 4, pp. 248-249
Study Session 12-50-f
describe the efficient frontier, and explain the implications for incremental returns as an investor assumes more risk
The
efficient frontier is curved. As an investor moves up the curve, risk
increases and the slope decreases. The decreasing slope means that
adding equal increments of risk provide diminishing increments of
expected return. 117 Correct answer is B “An Introduction to Portfolio Management,” by Frank K. Reilly and Keith C. Brown
2008 Modular Level I, Vol. 4, pp. 232-237
Study Session 12-50-d
compute and interpret the covariance of rates of return, and show how it is related to the correlation coefficient
If
the covariance of returns between two assets is a positive number, the
correlation coefficient for those two assets cannot be negative. The
correlation coefficient is equal to the covariance standardized by the
product of the individual standard deviations (which are always
positive). 118 Correct answer is C “An Introduction to Asset Pricing Models,” Frank K. Reilly and Keith C. Brown
2008 Modular Level I, Vol. 4, pp. 264-266
Study Session 12-51-e
calculate,
using the SML, the expected return on a security, and evaluate whether
the security is overvalued, undervalued, or properly valued
In
equilibrium the estimated rate of return is equal to the required
return. The CAPM required rate of return = 3% + (1.2 x 9%) = 13.8%. 119 Correct answer is A “The Asset Allocation Decision,” Frank K. Reilly and Keith C. Brown
2008 Modular Level I, Vol. 4, pp. 202-210
Study Session 12-49-a, b, c
describe the steps in the portfolio management process, and explain the reasons for a policy statement;
explain
why investment objectives should be expressed in terms of risk and
return, and list the factors that may affect an investor’s risk
tolerance;
describe the return objectives of capital preservation, capital appreciation, current income, and total return
The
investment objective must be expressed in terms of both risk and return
and current income from dividends and interest represents only the
investor’s return objective. It does not include any reference to risk
tolerance or risk limits as provided in the other alternatives. 120 Correct answer is A “An Introduction to Portfolio Management,” Frank K. Reilly and Keith C. Brown
2008 Modular Level I, Vol. 4, pp. 230-232
Study Session 12-50-c
compute
and interpret the expected return, variance, and standard deviation for
an individual investment and the expected return and standard deviation
for a portfolio
The expected return of an asset is the weighted
average of the possible returns = (0.35 x 8) + (0.30 x 10) + (0.25 x
16) + (0.10 x 20) = 11.8%.
The expected standard deviation is calculated as follows:
σ2 = 0.35 x (8 - 11.8)2 + 0.30 x (10 - 11.8)2 + 0.25 x (15 - 11.8)2 + 0.10 x (20 - 11.8)2
= 15.31
s = (15.31)0.5 = 3.91% | 
发表于 2008-11-21 10:17
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