Assume That as a Portfolio Manager the Beta of Your $\mathrm{RFR}=0.0625 \quad \mathrm{R}_{\mathrm{m}}($

question 95

Multiple Choice

Assume that as a portfolio manager the beta of your portfolio is 1.15 and that your performance is exactly on target with the SML data under condition 1. If the true SML data is given by condition 2, how much does your performance differ from the true SML? (1) $\mathrm{RFR}=0.0625 \quad \mathrm{R}_{\mathrm{m}}($ proxy) $=0.12$
(2) $\mathrm{R}_{\mathrm{K}}=0.078 \quad \mathrm{R}_{\mathrm{m}}($ true $) =0.10$

• A)2.53% lower
• B)3.85% lower
• C)2.53% higher
• D)4.4% higher
• E)3.85% higher

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Definitions:

Consumer Expenditures

The total spending by consumers on goods and services for personal use.

Profit Income

The financial gain that results when the revenue from business activities exceeds the expenses, costs, and taxes involved in sustaining the activity.

Market System

In this economic framework, the determination of investment, production, and distribution is influenced by the market signals emanating from the interplay of supply and demand.

Economic System

The mechanism or set of processes by which a society organizes and distributes its resources, goods, and services.