1. Which one of the following is the best interpretation of this VaR statistic: Prob (R_p - 0.15) = 37%?

• Your portfolio is expected to lose at least 15 percent, but not more than 37 percent in any given year.

• Sometime in the future, your portfolio is expected to lose 15 percent or more in a single year, but have an overall average rate of return of 37 percent.

• There is a 37 percent chance that your portfolio will decline in value by at least 15 percent over the next year.

• If your portfolio declines by 15 percent or more, that decline is expected to be followed by a 37 percent increase in value.

• There is a 37 percent chance that your portfolio will lose at least 15 percent of its value over the next 10 years. 2.

  What is the Treynor ratio of a portfolio comprised of 40 percent portfolio A, 25 percent portfolio B, and 35 percent portfolio C?

  Asset	Weight		Avg Return		Std Dev		Beta
  A	40	%	15.30	%	17.20	%	1.56
  B	25	%	10.50	%	9.80	%	0.95
  C	35	%	13.30	%	14.10	%	1.25

  The risk-free rate is 2.9 percent and the market risk premium is 8.6 percent.

  Multiple Choice

• 0.054

• 0.062

• 0.081

• 0.070

• 0.102