2019 CFA level 3 qbank reading 19 principles of asset allocation answers
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2019 CFA level 3 qbank reading 19 principles of asset allocation answers
Question #1 of 37Billy Kramer is deciding whether or not to add an emerging markets fund to his current 401 k which is broadly diversified among a mix 2019 CFA level 3 qbank reading 19 principles of asset allocation answers x of bond and equity funds. His current portfolio has an expected return of 9% with a standard deviation of 10%. The emerging markets fund has an expected return of 16%, a standard deviation of 21%, and a correlation of .74 with Kramer's current portfolio. Assume the risk free rate is 3%. Given this 2019 CFA level 3 qbank reading 19 principles of asset allocation answers information, should Kramer add the emerging markets fund to his current portfolio?A)No, since the emerging markets fund is adding significant risk an2019 CFA level 3 qbank reading 19 principles of asset allocation answers
d we don't know how much risk Kramer can tolerate.B)No, since the correlation between the emerging markets fund an portfolio is too high.C)Yes, since Question #1 of 37Billy Kramer is deciding whether or not to add an emerging markets fund to his current 401 k which is broadly diversified among a mix 2019 CFA level 3 qbank reading 19 principles of asset allocation answers (ER - Rf) / StiSharpe ratio of emlarket funds to the portfolio.If Sharpest > Sharpep X PEM p then add the eSharpe ratio of current p(9-3)/10 = 0.6arkets fund = (16 - 3) / 21 =0.620.62 > 0.6 X 0.74, the ore add the emerging markets fund to the portfolioIt'S true we don't know Kramer's level of risk 2019 CFA level 3 qbank reading 19 principles of asset allocation answers aversion but based on the Sharpe ratio alone we can see that by adding the emerging markets fund that his portfolio becomes more efficient by earning2019 CFA level 3 qbank reading 19 principles of asset allocation answers
a higherreturn for the same level of risk.(Study Session 9, Module 19.3, LOS 19.b)Related MaterialSchweserNotes ■ Book 3Question #2 of 37A bank is mosQuestion #1 of 37Billy Kramer is deciding whether or not to add an emerging markets fund to his current 401 k which is broadly diversified among a mix 2019 CFA level 3 qbank reading 19 principles of asset allocation answers h.C)Surplus efficient frontier approach.G o cExplanationBanks (along with insurance companies and hedge funds with short positions) make decisions about the composition of their liabilities jointly with their asset allocation decisions, which makes the integrated approach most appropriate.(Study Ses 2019 CFA level 3 qbank reading 19 principles of asset allocation answers sion 9, Module 19.6, LOS 19.1)Related MaterialSchweserNotes-B.p.ok.3Surplus optimization and the two-portfolio approach are distinct in that the compo2019 CFA level 3 qbank reading 19 principles of asset allocation answers
sition of the liabilities is already in place when the asset allocations decisions are made, so the two decisions are made independently.Question #3 oQuestion #1 of 37Billy Kramer is deciding whether or not to add an emerging markets fund to his current 401 k which is broadly diversified among a mix 2019 CFA level 3 qbank reading 19 principles of asset allocation answers lette manages all of Jones’ I firm, she has never met Jones. She do , however, that Jones' asset allocation is appropriate given her age and investment policy statement. The allocation of Jones' portfolio is shown below:Asset ClassAllocation (°/o)Cash0.05Intermediate-term Treasury bonds0High quality 2019 CFA level 3 qbank reading 19 principles of asset allocation answers corporate bonds0.05Question #1 of 37Billy Kramer is deciding whether or not to add an emerging markets fund to his current 401 k which is broadly diversified among a mixQuestion #1 of 37Billy Kramer is deciding whether or not to add an emerging markets fund to his current 401 k which is broadly diversified among a mixGọi ngay
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