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AAFM GLO_CWM_LVL_1 Exam - Topic 4 Question 95 Discussion

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?
C) 16%, 0.314, 0.273
A) 18%, 0.456, 0.312
B) 16%, 0.398, 0.296
D) 19%, 0.429, 0.316

AAFM GLO_CWM_LVL_1 Exam - Topic 4 Question 95 Discussion

Actual exam question for AAFM's GLO_CWM_LVL_1 exam
Question #: 95
Topic #: 4
[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?

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Suggested Answer: C

by Jodi at Nov 16, 2024, 09:50 AM

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Stevie
8 months ago
The expected return seems reasonable, but those deviations are tricky!
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Melissia
8 months ago
I disagree, I feel like the correlation change would really affect the outcome.
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Cheryl
8 months ago
Surprised by how low the standard deviation can go!
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Virgina
9 months ago
I think option D might be too optimistic.
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Dominga
9 months ago
Looks like option B is the most balanced choice.
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Alaine
9 months ago
I’m leaning towards option B, but I can't shake the feeling that I might have mixed up the correlation effects.
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Oliva
9 months ago
I think the expected return should be around 16%, but I’m not confident about the standard deviation. The correlation change might really affect it.
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Josefa
9 months ago
This question feels familiar; I think we did a similar one where we had to adjust for correlation. I hope I remember the right steps!
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Valentin
10 months ago
I remember we practiced calculating expected returns, but I'm unsure about the exact formulas for standard deviation in a portfolio.
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Josue
10 months ago
I'm feeling pretty confident about this one. The key is to apply the right portfolio theory equations and pay attention to the correlation coefficient change.
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Nu
10 months ago
Okay, I think I've got this. I'll plug the numbers into the portfolio optimization formulas and see which answer choice matches my calculations.
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Kati
10 months ago
Hmm, I'm a bit confused by the correlation coefficient part. How does that impact the portfolio metrics? I'll need to review that concept.
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Maryann
10 months ago
This looks like a standard portfolio optimization problem. I'll need to calculate the expected return and standard deviation based on the given information.
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Sherly
2 years ago
Forget the numbers, I'm just here for the portfolio memes. 'How to turn your investment into a complete nightmare in 3 easy steps.'
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Hana
2 years ago
User 3
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Willodean
2 years ago
User 2
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Margurite
2 years ago
User 1
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Kayleigh
2 years ago
Wait, did they just ask us to calculate the impact of correlation on a portfolio? Sounds like someone's been watching too many finance documentaries on Netflix.
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Elenora
2 years ago
But what about the impact of the correlation coefficient? Would it really make a big difference?
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Annmarie
2 years ago
I agree with Adrianna, option B seems to be the most reasonable choice.
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Aileen
2 years ago
High risk, high reward! 19% return and 0.429 standard deviation? Sign me up, I'm feeling lucky today!
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Gerald
2 years ago
It's all about finding the right balance between risk and reward.
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Salley
2 years ago
I prefer a more conservative approach, maybe option C would be better for me.
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Ricarda
2 years ago
I think I'll go with option D, 19% return sounds tempting.
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Izetta
2 years ago
That's a bold move, high risk indeed!
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Adrianna
2 years ago
I think the expected return would be 16% with option B.
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Evangelina
2 years ago
Ah, the sweet spot! 16% return and 0.314 standard deviation. Now that's what I call a well-balanced portfolio.
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Nadine
2 years ago
Azzie: I wonder how the numbers would change if the correlation coefficient was 0.6 instead of 0.2.
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Azzie
2 years ago
User 2: Definitely, it's the sweet spot for a well-balanced portfolio.
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Ressie
2 years ago
User 1: I agree, a 16% return and 0.314 standard deviation is ideal.
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Michael
2 years ago
I'm more of a conservative investor, so I'd go with option B - 16% return and 0.398 standard deviation. Seems like a safer bet.
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Micheline
2 years ago
Hmm, let's see... 18% return and 0.456 standard deviation? Sounds like a pretty risky investment to me.
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Glenn
2 years ago
That would definitely impact the risk and return of the portfolio.
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Gail
2 years ago
But what if the correlation coefficient was 0.6 instead of 0.2?
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Skye
2 years ago
I think option D looks more appealing with a 19% return.
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Latricia
2 years ago
I agree, that does seem like a high standard deviation.
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