Suppose That Portfolio Y Has a 20% Return and 22

question 102

Multiple Choice

Suppose that portfolio Y has a 20% return and 22% standard deviation. Market portfolio has a 15% return and 15% standard deviation. The annual risk-free rate is 5%. What is the M² measure?

• A) 0.57%
• B) -1.5%
• C) 0.23%
• D) 8.0%
• E) -0.75%

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Definitions:

Means

An average or central value derived from a set of numbers by adding them together and dividing by the number of values in the set.

Standard Deviation

A measure that quantifies the amount of variation or dispersion of a set of data values.

Normal Distribution

A statistical distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.

Mean

A statistical measure that represents the average value of a set of numbers, calculated by dividing the sum of all values by the number of values.