Portfolio Management Quiz 2

1 $\operatorname {E} (R_{p})=\sum _{i=1}^{n}\operatorname {E} (R_{i})w_{i}\quad$

Where:

$n$ = number of in the

$w_{i}$ = percent of in $i$

$\operatorname {E} (R_{i})$ = expected of $i$

$\operatorname {E} (R_{p})$ = expected of the

2 $E\left(R_{i}\right)=R_{f}+B_{1}F_{1}+B_{2}F_{2}+\cdots +B_{n}F_{n}$

Where:

$R_{f}$ = -

$B$ = of the to its associated

$F$ =

3 $E\left(\sigma _{p}^{2}\right)=\sum _{i=1}^{n}\sum _{j=1}^{n}v_{ij}w_{i}w_{j}$

for calculating

Where:

$E\left(\sigma _{p}^{2}\right)$ = of P

$w_{i},w_{j}$ = of $i,j$

$v_{ij}$ = of between $i$ and $j$

$n$ = number of securities in the portfolio

4 $r_{i}=r_{f}+\left(r_{m}-r_{f}\right)\beta _{i}+e_{i}$

Where:

$r_{i}$ = for $_{i}$

$r_{f}$ = - of

$r_{m}$ = from the

$\beta$ = beta of $_{i}$

$e_{i}$ = a random (with an expected value of zero) and with $r_{m}-r_{f}$ is known as the and measures the expected return pf the equity market over cash.

5 Modern portfolio theory has proved to be a useful way for investors to think about investment. However, its obvious shortcomings have limited its application. However, MPT and its offshoots continue to be seen frequently in the following three areas:

decisions

decisions relating to the of a

pricing

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