Deal of The Day! Hurry Up, Grab the Special Discount - Save 25% - Ends In 00:00:00 Coupon code: SAVE25
Welcome to Pass4Success

- Free Preparation Discussions
Mail Us support@pass4success.com
Location US
Mob_nav_barsMENU

AAFM GLO_CWM_LVL_1 Exam - Topic 2 Question 24 Discussion

Actual exam question for AAFM's GLO_CWM_LVL_1 exam
Question #: 24
Topic #: 2
[All GLO_CWM_LVL_1 Questions]

Given the following information:

What is the expected return and standard deviation of the portfolio if 50% of funds invested in each stock? What would be the impact if the correlation coefficient were 0.6 instead of 0.2?

Show Suggested Answer Hide Answer
Suggested Answer: C

by Glen at May 04, 2022, 06:40 AM

Limited Time Offer

25%

Off

Get Premium GLO_CWM_LVL_1 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

0/2000 characters
Submit Cancel
Chau
4 months ago
I agree with B, seems like a solid calculation!
upvoted 0 times
...
Corrie
5 months ago
Wait, how does a higher correlation affect the standard deviation?
upvoted 0 times
...
Adria
5 months ago
Definitely leaning towards C, but not sure about the numbers.
upvoted 0 times
...
Maryanne
5 months ago
I think A might actually be correct.
upvoted 0 times
...
Mozell
5 months ago
Looks like option B is the best choice!
upvoted 0 times
...
Allene
5 months ago
}
upvoted 0 times
...
Avery
6 months ago
]
upvoted 0 times
...
Dianne
6 months ago
"I’ve seen similar practice questions on ρ changes and 50/50 weights in the last set."}
upvoted 0 times
...
Dianne
6 months ago
"If ρ goes from 0.2 to 0.6, the cross-term grows and sd rises; diversification benefits shrink."},
upvoted 0 times
...
Dianne
6 months ago
"For sd we used σ_p = sqrt(0.25σ1^2 + 0.25σ2^2 + 0.5σ1σ2ρ)."},
upvoted 0 times
...
Dianne
6 months ago
"Equal weights, so r_p = 0.5(r1 + r2); that was the standard two-asset setup."},
upvoted 0 times
...
Quentin
6 months ago
[
upvoted 0 times
...
Kasandra
7 months ago
{
upvoted 0 times
...
Marshall
7 months ago
I'm feeling pretty confident about this one. I've worked with global temporary tables before, so I should be able to identify the correct statements.
upvoted 0 times
...
Dana
7 months ago
I know this is a portfolio optimization problem. I'll first calculate the portfolio return by taking the weighted average of individual stock returns.
upvoted 0 times
...

Save Cancel