Assume That as a Portfolio Manager the Beta of Your $\quad \mathrm{RFR}=.08 \quad \quad \quad \mathrm{P}_{\mathrm{m}}($

question 124

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) $\quad \mathrm{RFR}=.08 \quad \quad \quad \mathrm{P}_{\mathrm{m}}($ proxy $) =.11$
2) $\quad \mathrm{R}_{\mathrm{K}}=.07 \quad \quad \quad \quad \mathrm{R}_{\mathrm{m}}($ 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:

Antioxidants

Antioxidants are compounds that inhibit oxidation, a chemical reaction that can produce free radicals and chain reactions that may damage the cells of organisms.

Population Variances

The squared deviations of a population's values from the mean, indicating how widely the population data is spread out.

Pooled Proportion Estimate

A method to estimate the combined proportion of two or more groups by pooling their successes and trials.

Proportion of Successes

It is the fraction of successes in a series of Bernoulli trials, representing the number of successes divided by the total number of trials.