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AAFM GLO_CWM_LVL_1 Exam - Topic 2 Question 48 Discussion

Mr. Shyam has a portfolio consisting of two stocks A & B. Stock A has a standard deviation of 5 % while stock B has a standard deviation of 15%. Stock A comprises 40% of the portfolio and Stock B consists of 60%. If the correlation of returns of A& B is .5, the variance of return on the portfolio is _________.
D) 0.0103
A) --0.0035
B) --0.0085
C) 0.0094

AAFM GLO_CWM_LVL_1 Exam - Topic 2 Question 48 Discussion

Actual exam question for AAFM's GLO_CWM_LVL_1 exam
Question #: 48
Topic #: 2
[All GLO_CWM_LVL_1 Questions]

Mr. Shyam has a portfolio consisting of two stocks A & B. Stock A has a standard deviation of 5 % while stock B has a standard deviation of 15%. Stock A comprises 40% of the portfolio and Stock B consists of 60%. If the correlation of returns of A& B is .5, the variance of return on the portfolio is _________.

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Suggested Answer: D

by Donte at Aug 03, 2022, 04:11 PM

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My
10 months ago
Surprised the variance is that high with a 40/60 split!
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Joana
10 months ago
Wait, how does correlation even affect this?
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Quentin
11 months ago
Definitely leaning towards option B for the variance.
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Isidra
11 months ago
I think the variance calculation is tricky here.
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Jacquelyne
11 months ago
Stock A is way less volatile than Stock B!
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Cordell
11 months ago
I believe the formula involves squaring the weights and adding the covariance term, but I might be mixing it up with another topic.
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Xochitl
11 months ago
I think the variance should be lower than the highest individual variance, but I can't recall the exact calculation steps.
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Frederic
11 months ago
This question feels familiar; I think we did a similar one where we had to find the variance using weights and standard deviations.
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Delisa
11 months ago
I remember we calculated portfolio variance in class, but I'm not entirely sure about the formula when correlation is involved.
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Willodean
11 months ago
Okay, I've got a strategy for this. I'll visualize the utility interface and mentally go through the list of applications, remembering which one is not selected by default. I think I can figure this out.
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Barrett
11 months ago
Okay, let's see. Sulfidation is related to the formation of sulfide compounds, so I'm guessing it's going to create some kind of localized attack rather than uniform corrosion.
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Dwight
11 months ago
Based on my understanding, the TOGAF Architecture Governance Framework is all about establishing processes and procedures to manage and maintain an organization's architecture. I think option A is the best description of that.
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Huey
12 months ago
I think the key here is understanding the relationship between Teams and OneDrive for Business. Since Teams uses OneDrive for file storage, an In-Place Hold on the user's OneDrive might prevent them from permanently deleting those private chat files. But I'm not 100% sure if that's the correct approach.
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