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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Laine

10 days 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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Shonda

12 days 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

16 days 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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Meaghan

16 days ago

Hmm, this looks like a classic risk-return relationship question. Let me think this through carefully.

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Kathrine

3 days ago

A) 0.94

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Shonda

21 days ago

I think we need to calculate the Beta of portfolio A.

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