PORTFOLIO MANAGEMENT EXAM 1 QUESTIONS
WITH 100% CORRECT SOLUTIONS 2025.
Portfolio Answer - A collection of assets
Correlation coefficient Answer - Is the covariance of return A and Return B
divided by SD of A multiplied by the SD of B
Should be between -1 and 1
Relationship between risk in return Answer - most important relationship in
finance
High risk=high return / low risk=low return
How do we measure risk of return?
SD of return (total risk)
Sharp ratio Answer - Measurement of relationship between risk and return
The Planning Step Answer - (Steps in the Portfolio Management Process)
Identify and specify the investor's objectives and constraints
Create the investment policy statement
Form capital market expectations
Create the strategic asset allocation
, The Execution Step Answer - (Steps in the Portfolio Management Process)
Select specific assets and implement decisions
Optimize the portfolio
Determine need for tactical asset allocation
The Feedback Step Answer - (Steps in the Portfolio Management Process)
Monitoring and rebalancing
Performance evaluation
Standard deviation Answer - How do we measure risk?
Utility function Answer - How much risk is investor willing or able to bear?
Types of Investment Objectives Answer - Risk and return are?
Standard deviation Answer - how do we measure risk?
Liquidity Answer - (Types of Investment Constraints)
the need for cash in excess of savings or new
contributions at specific times in the future
Time horizon Answer - (Types of Investment Constraints)
Short, long or a combination
Investment Policy Statement Answer - Plays a central role in the portfolio
management process
WITH 100% CORRECT SOLUTIONS 2025.
Portfolio Answer - A collection of assets
Correlation coefficient Answer - Is the covariance of return A and Return B
divided by SD of A multiplied by the SD of B
Should be between -1 and 1
Relationship between risk in return Answer - most important relationship in
finance
High risk=high return / low risk=low return
How do we measure risk of return?
SD of return (total risk)
Sharp ratio Answer - Measurement of relationship between risk and return
The Planning Step Answer - (Steps in the Portfolio Management Process)
Identify and specify the investor's objectives and constraints
Create the investment policy statement
Form capital market expectations
Create the strategic asset allocation
, The Execution Step Answer - (Steps in the Portfolio Management Process)
Select specific assets and implement decisions
Optimize the portfolio
Determine need for tactical asset allocation
The Feedback Step Answer - (Steps in the Portfolio Management Process)
Monitoring and rebalancing
Performance evaluation
Standard deviation Answer - How do we measure risk?
Utility function Answer - How much risk is investor willing or able to bear?
Types of Investment Objectives Answer - Risk and return are?
Standard deviation Answer - how do we measure risk?
Liquidity Answer - (Types of Investment Constraints)
the need for cash in excess of savings or new
contributions at specific times in the future
Time horizon Answer - (Types of Investment Constraints)
Short, long or a combination
Investment Policy Statement Answer - Plays a central role in the portfolio
management process
