Question 30 of 50

How is the expected return of a portfolio calculated?

Which component is added to the weighted individual variances to calculate the variance of a two-asset portfolio?

What is the relationship between covariance and correlation?

If Asset A has a return of 10 percent with a weight of 40 percent, and Asset B has a return of 20 percent with a weight of 60 percent, what is the portfolio expected return?

In a three-asset portfolio, how many covariance terms are included in the variance calculation?

Which of the following is required to calculate Covariance using a Joint Probability Function?

What does Mean-Variance Analysis primarily weigh against each other?

Which assumption is essential for Mean-Variance Analysis to hold exactly?

Under what condition regarding returns does Mean-Variance Analysis hold?

What utility function allows Mean-Variance Analysis to hold?

How is Roy's Safety First Ratio (SFR) calculated?

When using Roy's Safety First Rule, which portfolio should an investor select?

An investor has a Minimum Acceptable Return of 5 percent. Portfolio A has an Expected Return of 20 percent and a Standard Deviation of 15 percent. What is the SFR?

If Portfolio B has an SFR of 2, and the Minimum Acceptable Return is 5 percent, what does this imply about the Shortfall Risk compared to a portfolio with an SFR of 1?

Shortfall risk represents the probability of what event?

What is Value at Risk (VaR) primarily used to measure?

Which technique estimates losses in extremely unfavorable combinations of events?

If a portfolio has a standard deviation of 12 percent and a weight of 100 percent in a single asset, what is the portfolio variance?

Given: Covariance(A,B) = 0.00288. If the weights of A and B are 40 percent and 60 percent respectively, what is the contribution of the covariance term to the portfolio variance?

Calculate the expected return E(A) given the following joint probabilities: 30 percent chance of 10 percent return, 20 percent chance of 12 percent return, 50 percent chance of 20 percent return.

If E(A) = 15.40 percent, E(B) = 10.30 percent, and E(AB) = 1.81 percent, what is the Covariance between A and B?

What does a correlation of 0.3 between Asset A and Asset B imply?

In the calculation of standard deviation for a portfolio, what is the final step after calculating the variance?

If returns are normally distributed, which two parameters fully describe the distribution?

If an investor is risk-neutral, how would they view Mean-Variance Analysis?

What is the formula for covariance given correlation?

Calculate the Safety First Ratio if Expected Return is 25 percent, Minimum Acceptable Return is 5 percent, and Standard Deviation is 10 percent.

Why do investors look for the left of -1 or -2 in normal distribution tables when calculating Shortfall Risk?

If Portfolio A has a Shortfall Risk of 15.86 percent and Portfolio B has a Shortfall Risk of 2.27 percent, which is preferable according to Roy's Safety First Rule?

In the context of covariance calculation, what is 'E(AB)'?

Calculate the weighted covariance term (2*Wa*Wb*Cov) if Wa=0.5, Wb=0.5, and Covariance=0.04.

What does a negative covariance between two assets indicate?

Why might Mean-Variance Analysis be useful even if assumptions are violated?

When calculating expected return for a portfolio with unequal weights, which operation is performed?

Calculate portfolio variance: Weight A = 0.4, SD A = 0.08, Weight B = 0.6, SD B = 0.12, Correlation = 0.3.

What is the portfolio standard deviation if the portfolio variance is 0.0075904?

If two assets have a correlation of 1.0, what is the effect on portfolio standard deviation compared to a correlation of 0.3?

Which measure is best for comparing portfolios when the investor cares about avoiding returns below a specific target?

Assuming 250 trading days in a year, how is a daily return of 2 percent annualized (simple scaling)?

What is the 'Sigma Scaling rule' for annualizing daily standard deviation?

If Portfolio A has an expected return of 10 percent and Portfolio B has an expected return of 12 percent, what is the expected return of a portfolio invested 50/50 in both?

Stress testing is used to address the limitations of which measure?

When calculating the covariance of a portfolio with 3 assets, how many variance terms (squared terms) are in the formula?

What does a Joint Probability table display?

If the Safety First Ratio is negative, what does this indicate?

Which method is described as 'weighing risk against reward'?

In the MVA framework, what type of investor behavior is assumed?

What is E(AB) if E(A) is 10 percent, E(B) is 5 percent, and Covariance is 0.001?

Scenario analysis differs from VaR because: