AAFM CWM_LEVEL_2 Exam - Topic 4 Question 57 Discussion

Actual exam question for AAFM's CWM_LEVEL_2 exam

Question #: 57
Topic #: 4

Section C (4 Mark)

Read the senario and answer to the question.

Portfolio A had a return of 12% in the previous year, while the market had an average return of 10%. The standard deviation of the portfolio was calculated to be 20%, while the standard deviation of the market was 15% over the same time period. If the correlation between the portfolio and the market is 0.8, what is the Beta of the portfolio A?

A0.94

B1.07

C1.31

D1.91

Show Suggested Answer

Suggested Answer: B

by Youlanda at Mar 25, 2023, 03:49 AM

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Selene

6 months ago

Not sure about this one, the math seems tricky. Can someone double-check?

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Clay

6 months ago

Definitely going with C, 1.31. That portfolio is pretty volatile!

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Sue

6 months ago

Wait, how can the Beta be over 1 with a lower return? Sounds off.

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Adrianna

6 months ago

I think the answer is B, 1.07. Seems right based on the numbers!

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Arlen

6 months ago

Beta is calculated using the formula: Beta = (Correlation * Portfolio Std Dev) / Market Std Dev.

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Dong

7 months ago

I think the answer is around 1.07, but I’m not entirely confident. I just hope I remember the formula correctly!

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Mari

7 months ago

I feel like I might be mixing up the Beta calculation with something else. Wasn't there a way to adjust for the correlation as well?

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Myong

7 months ago

This reminds me of a practice question where we had to find Beta too. I think it was something like the portfolio return minus the market return divided by the market's standard deviation.

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Alesia

7 months ago

I remember we calculated Beta using the formula involving correlation and standard deviations, but I'm not completely sure about the exact steps.

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Alaine

7 months ago

I'm a bit torn on this one. The Prototype model seems like a good fit, but the V-Model could also work since it has a focus on validation and verification throughout the process.

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Fernanda

7 months ago

I think I've got it. Entering a live chat agent and enabling the service cloud console are the two best options to make it easy for customers to submit requests.

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