AAFM Exam GLO_CWM_LVL_1 Topic 3 Question 87 Discussion

Actual exam question for AAFM's GLO_CWM_LVL_1 exam

Question #: 87
Topic #: 3

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: D

by Wenona at Aug 22, 2024, 01:45 PM

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Annelle

2 months ago

Correlation of 0.8? That's a pretty strong relationship between the portfolio and the market. I wonder how that factors in.

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Mertie

2 days ago

I'm leaning towards the Beta of the portfolio A being 1.31.

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Levi

3 days ago

C) 1.31

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Rolf

4 days ago

I believe the Beta of the portfolio A is 1.07.

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Marya

5 days ago

B) 1.07

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Laurel

6 days ago

I think the Beta of the portfolio A is 0.94.

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Lucia

17 days ago

A) 0.94

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Vallie

2 months ago

Woah, this is really testing my finance chops. I better not mess this one up!

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Lore

29 days ago

B) 1.07

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Catarina

1 months ago

I think it's A) 0.94

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Lavonne

2 months ago

A) 0.94

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Lucy

2 months ago

Haha, this question is like a math puzzle. I bet the answer is hidden in those standard deviation and correlation numbers.

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Laine

2 months ago

Okay, I remember learning about beta and how it relates to market risk. Time to put that knowledge to the test!

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Carey

1 months ago

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Shonda

2 months ago

That makes sense. So, the Beta of portfolio A would be 0.8 * (20% / 15%) = 1.07. The answer is B.

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Cassie

2 months ago

I agree. The correlation between the portfolio and the market is 0.8, so we can use the formula Beta = correlation * (standard deviation of portfolio / standard deviation of market).

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