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Harold Is a College Sophomore Who Is Trying to Get

question 19

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Harold is a college sophomore who is trying to get in shape for spring break. He would like to lose the body weight that he gained during his freshman and sophomore years. In high school, he played sports and his family prepared healthy meals, but his freshman and sophomore years have proven to be very different with late nights of school work, hanging out with friends playing poker, and eating lots of take-out food, snacking on pizza, and drinking soda. Harold, who is 5' 10", has gained 18 pounds and now weighs 182 pounds.
Harold has never tried to lose weight before and decides to talk to a personal trainer at the gym to get help. During Harold's consultation, the personal trainer calculates his BMI, determines his ideal body weight, and measures his body fat content using skinfold calipers. The personal trainer tells Harold his body composition is 26% fat. The personal trainer also measures Harold's waist, and his waist circumference is a little over 40".
What does Harold's waist circumference indicate?

Definitions:

Capital Market Line

A line used in the capital asset pricing model to depict the rates of return for efficient portfolios depending on the risk-free rate of return and the level of risk (standard deviation) for a particular portfolio.

Characteristic Line

In finance, a line that describes the relationship between the return on an investment and the return on the market as a whole, used in the Capital Asset Pricing Model.

Systematic Risk

Systemic risk associated with the overall market or a particular segment of the market, widely known as market risk, remains even after diversification efforts.

Unsystematic Risk

The risk of price change due to the unique circumstances of a specific security, as opposed to the overall market.