Re: Portfolio HW Questions
Ratan Gupta, FRM
I hope that others are also attempting the HW problems.
Q9 - Typo , correct answer is A = 10
Q10 - it decreases the portfolio risk
Q15 B is the most correct option, Risk is divided into Systematic and
Un-systematic (which people also call, firm specific / industry
specific), but the most correct would be Un-Systematic
Q22 - yes, both should be correct, pls correct the option B as
Securities that plot above the SML are undervalued
Thanks
Ratan
On Feb 8, 8:42 am, Geetha Vramani <vramani.gee...@gmail.com> wrote:
> Hi Ratan/Abhishek,
>
> I have the following questions from Portfoilio HW problems. Please
> advise -
>
> Q 9) ** Covar (i,m) 100 & var of Mkt portfolio is 10.
> Then Beta should be 100/10 = 10. But answer is given as 1. WHY?
>
> Q 10) *** Why a stock having lower return than total portfolio return
> and less than 1 correlation should be added to a portfolio?
>
> Q 15) Isn't Unsystematic risk also defined as firm specific risk. The
> answer to this question can be B or C. Why is B alone given?
>
> Q 22) 2nd option that securities that plot above the SML are
> overvalued is least correct. But the answer is given as securities
> that plot above the SML are undervalued is also least correct. WHY?
> ISN'T BOTH THESE OPTIONS EQUALLY INCORRECT?
>
> Thanks,
> Geetha