Assume That as a Portfolio Manager the Beta of Your $\mathrm{RFR}=0.0475 \quad \mathrm{R}_{\mathrm{m}}($

question 28

Multiple Choice

Assume that as a portfolio manager the beta of your portfolio is 0.85 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) $\mathrm{RFR}=0.0475 \quad \mathrm{R}_{\mathrm{m}}($ proxy) $=0.0975$
(2) $\mathrm{R}_{\mathrm{K}}=0.0325 \quad \mathrm{R}_{\mathrm{m}}($ true $) =0.0845$

• A)1.33% higher
• B)2.35% lower
• C)8% lower
• D)1.33% lower
• E)2.35% higher

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Definitions:

NMR Protons

Refers to the hydrogen atoms in a molecule that are detectable by nuclear magnetic resonance spectroscopy, providing information on molecular structure.

α-Carbon

The carbon atom adjacent to the functional group in an organic molecule, particularly significant in amino acids and carbonyl compounds.

Amines

Organic compounds and functional groups that contain a basic nitrogen atom with a lone pair, often classified as primary, secondary, or tertiary.

Base

A substance capable of accepting protons according to the Bronsted-Lowry theory or donating electron pairs in Lewis theory; it counteracts acids.