nopes, sorry. All I know is that it was a 6 questions vignette. I will surely post the QNumber at around 7ish.
Knew A. Active b/c you constantly have to rebalance the fund. Guessed B. - B is my default answer if I have no idea. I am trying to decipher your equation CP.
I’m 0/2 here as well. I just realized i’m averaging like 2/18 for all the new questions being posted. maybe #1 is A because they are asking for “active risk”, with a beta of 0 the standard deviation of the returns are from unsystematic risk and is all alpha.
i chose C and C…damnation. the formula for active risk = Rinvestment - Rbenchmark / Std ( Rinvestment - Rbenchmark )
Back, here are the details. Question Id: 88892 Of the proposed hedge funds, which is most likely to introduce active risk into the client’s portfolio? A) The Beta Naught Fund. B) Hi Rise Real Estate Fund. C) New Horizon Emerging Market Fund. Your answer: C was incorrect. The correct answer was A) The Beta Naught Fund. The Beta Naught Fund is the only one that takes short-term positions. (Study Session 18, LOS 66.a) Which of the following is closest to the expected standard deviation of the client’s portfolio if 10% of the portfolio is invested in the Quality Commodity Fund? A) 9.6%. B) 14.2%. C) 16.0%. Your answer: C was incorrect. The correct answer was B) 14.2%. The covariance is 51.84 = 0.8 × (-0.2) × 324. The variance is 200.59 = (0.9 × 0.9 × 16 × 16) + (0.1 × 0.1 × 16 × 16) + (2 × 0.9 × 0.1 × (-51.84). The square root of the variance is approximately 14.2%. (Study Session 18, LOS 66.a)
Although in part B they have used the formula (B1*B2*variance) to calculate Covarience, Why cannot we use the formula for B from CAPM. Tha is, Beta=Cov/Variance of the market, which implies Cov= Beta*variance of the market5. I used the second forumla and got a anser which was very close to B. Can anyone explain when to use the first forumla for Beta and when to used the second forumla?