Portfolio management

Question 1

Portfolio variance

Answer 1

Portfolio Variance = w^2Aσ2(RA) + w^2Bσ2(RB) + 2(wA)(wB)*Cov(RA, RB)

Question 2

Corr(A,B)

Answer 2

Cov(A,B)/oAoB

Question 3

Annualized return

Answer 3

(1+i)^12/m - 1

Question 4

Beta of stock A compared to market

Answer 4

Corr(A,Market)*o(A)/o(Market)

OR

Cov(Ri, Rm)/σm2

Question 5

Capital allocation line

Answer 5

shows possible combinations of a risky portfolio and the risk-free asset

Question 6

Cov(A,B)

Answer 6

Corr(A,B) * o(A) * o(B)

Question 7

In a defined contribution pension plan,

Answer 7

employee accepts the investment risk

Question 8

Beta

Answer 8

Cov(A,M)/varience of market OR Corr (A,M) * stand dev A/stand dev M