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QUESTION 27 Zoe has been saving diligently for many years and has accumulated an appropriate emergency fund along with substantial retirement savings which will allow

QUESTION 27

  1. Zoe has been saving diligently for many years and has accumulated an appropriate emergency fund along with substantial retirement savings which will allow her to enjoy all of her favorite activities during retirement and make generous gifts to her nieces and nephews over the next several years. Zoe experiences extreme anxiety when her portfolio declines in value. Which of the following is true?

    a. Zoe's willingness (propensity) to take on risk is greater than her ability (capacity) to take on risk, so her portfolio should have a moderately aggressive asset allocation.

    b. Zoe's ability (capacity) to take on risk is greater than her willingness (propensity) to take on risk, so her portfolio should have a conservative asset allocation.

    c. Zoe's willingness (propensity) to take on risk is greater than her ability (capacity) to take on risk, so her portfolio should have a conservative asset allocation.

    d. Zoe's ability (capacity) to take on risk is greater than her willingness (propensity) to take on risk, so her portfolio should have a moderately aggressive asset allocation.

QUESTION 28

  1. A mean variance optimization model generally includes all of the following inputs for each asset class except?

    a. Expected return.

    b. Expected standard deviation.

    c. Expected correlation between each asset class.

    d. Expected beta.

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