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AAFM GLO_CWM_LVL_1 Exam - Topic 6 Question 11 Discussion

Consider the following information for three stocks, Stock A, Stock B, and Stock C. The returns on each of the three stocks are positively correlated, but they are not perfectly correlated.Portfolio X has half of its funds invested in Stock A and half invested in Stock B. Portfolio Y has invested its funds equally in each of the three stocks. The risk-free rate is 5%, and the market is in equilibrium.Which of the following statements is/are correct?
B) Only II
A) II and III
C) I,II and III
D) Only IV

AAFM GLO_CWM_LVL_1 Exam - Topic 6 Question 11 Discussion

Actual exam question for AAFM's GLO_CWM_LVL_1 exam
Question #: 11
Topic #: 6
[All GLO_CWM_LVL_1 Questions]

Consider the following information for three stocks, Stock A, Stock B, and Stock C. The returns on each of the three stocks are positively correlated, but they are not perfectly correlated.

Portfolio X has half of its funds invested in Stock A and half invested in Stock B. Portfolio Y has invested its funds equally in each of the three stocks. The risk-free rate is 5%, and the market is in equilibrium.

Which of the following statements is/are correct?

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Suggested Answer: B

by Alaine at May 06, 2022, 02:36 AM

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Margarett
10 months ago
Portfolio Y seems more balanced with all three stocks!
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Portia
11 months ago
I think only II is correct, not sure about the others.
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Lachelle
11 months ago
Wait, why is Stock C not in Portfolio X?
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Gwenn
11 months ago
Totally agree, that's a solid mix!
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Daisy
11 months ago
Stocks A and B are half of Portfolio X.
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Youlanda
11 months ago
Okay, let me think this through. The key information I need to identify is the number of replications, factors, and levels. I'll carefully review the options to determine which one matches the details provided in the question.
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Kaitlyn
11 months ago
Okay, let's think this through step-by-step. I remember learning about Cpk in class, so I think I can figure this out.
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Lorean
12 months ago
There was a similar practice question using r_f = 5% and 'market in equilibrium'—the portfolio returns lie on the capital market line and are priced consistently.
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