Exhibit 18-9
THE FOLLOWING INFORMATION IS FOR THE NEXT PROBLEM(S)

question 59

Multiple Choice

Exhibit 18-9
THE FOLLOWING INFORMATION IS FOR THE NEXT PROBLEM(S)
Consider the following information for four portfolios, the market and the risk free rate (RFR) $\begin{array}{|l|c|c|c|}\hline \text { ortfolio } & \text { Return } & \text { Beta } & \text { SD } \\\hline \text { A1 } & 0.15 & 1.25 & 0.182 \\\hline \text { A2 } & 0.1 & 0.9 & 0.223 \\\hline \text { A3 } & 0.12 & 1.1 & 0.138 \\\hline \text { A4 } & 0.08 & 0.8 & 0.125 \\\hline \text { Market } & 0.11 & 1 & 0.2 \\\hline \text { RFR } & 0.03 & 0 & 0 \\\hline\end{array}$
-Refer to Exhibit 18-9. Calculate the Jensen alpha Measure for each portfolio.

• A) A1 = 0.014, A2 = -0.002, A3 = 0.002, A4 = -0.02
• B) A1 = 0.002, A2 = -0.02, A3 = 0.002, A4 = -0.014
• C) A1 = 0.02, A2 = -0.002, A3 = 0.002, A4 = -0.014
• D) A1 = 0.02, A2 = -0.002, A3 = 0.02, A4 = -0.14
• E) None of the above.

Explain the concept of currency valuation and determinants such as demand and supply, and economic indicators.

Understand the role of government intervention in the foreign exchange market and its impact on currency stability.

Analyze the effects of currency strength or weakness on international trade dynamics.

Differentiate between direct and indirect quotes in foreign exchange markets.

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Definitions:

Random Variable

A variable with values that are numerical manifestations of random happenings.

Standard Normal

A typical distribution that has a mean value of 0 and a standard deviation value of 1.

Obtaining

The act of gaining possession of something, usually after an effort.

Uniformly Distributed

A distribution where all outcomes are equally likely, and the variable's values are spread evenly over the range of possibilities.