AFIN3052 Practice Exam x Microsoft Word - Samplex AEIN3052 Practice Exam Homework pt=8952588&cmid-6518038&page=1 Active Portfolio Management (8 marks) Consider a small economy that there are only two risky assets, Stock (S) and Bond (8). CAPM was used as the baseline model for Black Litterman Model. Use the information in the following tables. Baseline model estimations: Risk premium Stock 8% Bond 2% Estimation error of the baseline model as variance matrix Stock Stock 0.0025 Bond 0.00015 0.0001 Bond 0.00015 The manager represented his view as below: PR' = Q+E P = (-11) R = (RsRe) Q = 196 O = 496 What is the view of the manager in plain language? (3 marks) b) By considering the manager's view, what is the view of the baseline model? (1 mark) What is the variance of the baseline model's view? (2 marks) What are the Black Litterman adjusted values of the risk premia of Stock? (2 d) marks) AFIN3052 Practice Exam x Microsoft Word - Samplex AEIN3052 Practice Exam Homework pt=8952588&cmid-6518038&page=1 Active Portfolio Management (8 marks) Consider a small economy that there are only two risky assets, Stock (S) and Bond (8). CAPM was used as the baseline model for Black Litterman Model. Use the information in the following tables. Baseline model estimations: Risk premium Stock 8% Bond 2% Estimation error of the baseline model as variance matrix Stock Stock 0.0025 Bond 0.00015 0.0001 Bond 0.00015 The manager represented his view as below: PR' = Q+E P = (-11) R = (RsRe) Q = 196 O = 496 What is the view of the manager in plain language? (3 marks) b) By considering the manager's view, what is the view of the baseline model? (1 mark) What is the variance of the baseline model's view? (2 marks) What are the Black Litterman adjusted values of the risk premia of Stock? (2 d) marks)