2. Saving and Investing

Risk And Return — Quiz

Test your understanding of risk and return with 5 practice questions.

Practice Questions

Question 1

For a portfolio valued at \1{,}000{,}000 with an annual standard deviation of 20\%, assuming normally distributed returns, what is the 99\% one-year Value at Risk (VaR)?

Question 2

A portfolio holds Asset A (weight 50\%, \$\beta=1.2\$), Asset B (weight 30\%, \$\beta=0.8\$), and Asset C (weight 20\%, \$\beta=1.5\$). What is the portfolio beta?

Question 3

If an investment yields a nominal return of 10\% and inflation is 3\%, what is the exact real return?

Question 4

An investment has an average return of 12\%, a minimum acceptable return of 3\%, and a downside deviation of 8\%. What is the Sortino ratio?

Question 5

A portfolio consists of two assets with weights of 50\% each. Asset X has \$\sigma_X=15\%\$, Asset Y has \$\sigma_Y=10\%\$, and the correlation is \$\rho=0.2\$. What is the portfolio standard deviation?