Assume That as a Portfolio Manager the Beta of Your $\quad \mathrm{RFR}=.09$

question 21

Multiple Choice

Assume that as a portfolio manager the beta of your portfolio is 1.2 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) $\quad \mathrm{RFR}=.09$ $\quad$$\quad$$\quad$ $\mathrm{R}_{\mathrm{m}}($ proxy $) =.12$
2) $\quad \mathrm{R}_{\mathrm{K}}=10$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\mathrm{R}_{\mathrm{m}}($ true $) =13$

• A) 2% lower
• B) 1% lower
• C) 5% lower
• D) 1% higher
• E) 2% higher

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Definitions:

Stressed

Experiencing mental or emotional strain or tension resulting from adverse or demanding circumstances.

Bored

Feeling weary or restless due to a lack of interest in one's current activities or surroundings.

Nonverbal Signals

Communication without the use of spoken language, including gestures, facial expressions, and body language.

Higher Management

A level of management that includes top executives who are responsible for making strategic decisions and overseeing the overall direction of an organization.