CFA CFA Level 1 CFA Level 1 Question of the Week – Portfolio Management

CFA Level 1 Question of the Week – Portfolio Management

  • Author
    Posts
    • Matt_AnalystPrep
      Participant
      Up
      0
      Down

      A portfolio manager is constructing a portfolio composed of two assets. Asset A is a risky asset with an expected return of 14% and a standard deviation of 22% whereas asset B is a risk-free asset with a return of 9%. If the portfolio manager increases the weight of the risky asset to 130%, then the portfolio’s expected return is closest to:

      • A. 18.2%
      • B. 15.5%
      • C. 16.7%
    • saralseth
      Participant
      Up
      4
      Down

      solution please

    • Matt_AnalystPrep
      Participant
      Up
      5
      Down

      The correct answer is B.

      Expected return of the portfolio = (Weight of Asset A * Return of Asset A) + (Weight of Asset B * Return of Asset B) = (130% * 14%) + (-30% * 9%) = 15.5%

Viewing 2 reply threads
  • You must be logged in to reply to this topic.