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Errors Found in Study Materials P1.T1. Foundations

Nicole Seaman

Chief Admin Officer
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Thread starter #23
Hi @Nicole Seaman,

In mock exam E, question 21, the question and the respective answer are not the same as in here in 503.1.

Best,
Hello@aangermeyer

Can you please let me know where you are seeing that they do not match the question and answer here in the forum? I just checked the PDF and the interactive quiz and question 21 shows what is here in the forum.

Thank you,

Nicole
 

Nicole Seaman

Chief Admin Officer
Staff member
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Thread starter #24
Hi @Nicole Seaman,

I think in Mock exam E, question 13, the answers do not belong to the stated question (which is question 703.2 in this thread).

Thanks,
@aangermeyer

I just checked the Mock E PDF and the interactive quiz and I do not see a discrepancy. The question and answers in mock E match what is here in the forum. Can you let me know where you are seeing that they don't match?

Thank you,
Nicole
 

aangermeyer

Member
Subscriber
#26
Hello@aangermeyer

Can you please let me know where you are seeing that they do not match the question and answer here in the forum? I just checked the PDF and the interactive quiz and question 21 shows what is here in the forum.

Thank you,

Nicole
Hi @Nicole Seaman,

again, have a look at the second part of the document where the explanations for the answer is given.

Thanks,
 

Branislav

Member
Subscriber
#33
this should be 20%, typo error I believe
Sorry, mine mistake, actually it is assumed that portfolio volatility and benchmark volatility are the same 10%.Just according to mine intuition, I was expected that higher return corresponds to higher volatility (at least when we are talking about efficient portfolios),but it looks like in this example our portfolio simply outperforms benchmark in terms that with same volatility gives higher return ( I am talking in terms of expected values).Please correct me if I am wrong. Kind regards
 

David Harper CFA FRM

David Harper CFA FRM (test)
Staff member
#34
Hi @Branislav You make a good point: a better input assumption would be a portfolio volatility, σ(r), that is higher than 10.0%; it does not need to be double, but a higher volatility would preserve a natural, theoretical trade-off between the higher-return/higher-risk portfolio and the lower-return/lower-risk benchmark. Under these assumptions, the Benchmark is "inefficient" in a way similar to how the lower segment of the portfolio possibilities curve (PPC) is inefficient on capital market line (CML): if you can get the same risk between to choices (in this case, σ = 10.0%), you should always prefer the choice with a higher return! ... So I do concede that my assumption is un-natural and maybe even imprecise, although as you've noted, it is merely in service of generating simulating returns for a portfolio in comparison to it's bechmark. Put another way, I was trying to impose guaranteed "alpha" into the outcome. The inputs are merely used to generate simulated returns, which is important. A key distinction is between ex ante (i.e., expected performance) and ex post (i.e., measured after the returns are produced) performance measures: while some measures can be either, the Sortino is a great example of an ex post measure, it really deserved to be measured on returns after they have been generated. Thank you!
 
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