Assume That as a Portfolio Manager the Beta of Your $\mathrm{RFR}=.08$

question 12

Multiple Choice

Assume that as a portfolio manager the beta of your portfolio is 1.3 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(1) $\mathrm{RFR}=.08$$\quad\quad R_{m}(\text { proxy }) =.11$
(2) $\mathrm{RK}_{\mathrm{K}}=.07$$\quad\quad\mathrm{R}_{\mathrm{m}}(\text { true }) =.14$

• A)4.2% lower
• B)3.6% lower
• C)3.8% lower
• D)4.2% higher
• E)3.6% higher

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Definitions:

Environmental Costs

Expenses associated with the negative impact of a company's actions on the environment, including remediation, prevention, and external costs.

Conventional

Pertaining to common practices, methods, or standards that are widely accepted and employed.

Internal

Pertaining to activities, processes, or elements that exist or occur within an organization.

Triple Bottom Line Reports

Financial reports that evaluate a company's performance in three areas: economic, environmental, and social responsibility, aimed at achieving sustainable business practices.