Note: for this section, assume your discussions will be posted in a journal, which targets readers with lowmoderate investment knowledge.\ Q1: Using basic terminology, explain why the Sharpe Ratio is a useful computation (i.e., from the perspective of

E(r)

and

\\\\sigma

).\ Answer:\ Q2: A colleague assumes that the relationship between the number of stocks in a portfolio and risk reduction is perfectly linear-state your opinion.\ Q3: A friend, who is studying for the CFA examination asks you about the impact of standard deviation(s) on the Treynor Ratio- indicate the information you'd provide to your friend.\ Q4: You overhear a newly-hired co-worker state that higher stock pricing variance is synonymous with lower overall risk; if asked to offer an opinion, explain how you would respond.\ Q5: As a new intern at an asset management company, you are tasked with explaining the distinctions between correlation and covariance- outline what details you would present.\ Quantitative\ (10 Points/Question)\ Q1: You are presented with the following data for stock YSJ Inc.:\ \\\\table[[Probability of occurrence(s),Return(s)],[0.15,

-22%

Note: for this section, assume your discussions will be posted in a journal, which targets readers with lowmoderate investment knowledge. Q1: Using basic terminology, explain why the Sharpe Ratio is a useful computation (i.e., from the perspective of E(r) and ). Answer: Q2: A colleague assumes that the relationship between the number of stocks in a portfolio and risk reduction is perfectly linear- state your opinion. Q3: A friend, who is studying for the CFA examination asks you about the impact of standard deviation(s) on the Treynor Ratio- indicate the information you'd provide to your friend. Q4: You overhear a newly-hired co-worker state that higher stock pricing variance is synonymous with lower overall risk; if asked to offer an opinion, explain how you would respond. Q5: As a new intern at an asset management company, you are tasked with explaining the distinctions between correlation and covariance- outline what details you would present. Quantitative (10 Points/Question) Q1: You are presented with the following data for stock YSJ Inc.: Calculate: the expected return, variance and standard deviation; also, explain your results. Q2: Assume that you combine stock YSJ Inc. (from Q1) with stock YFK Inc., whose E(r) and are 14% and 19%, respectively; if the correlation between each stock =+0.38, what is the portfolio's standard deviation and E(r) (*50\% of the funds are allocated to each stock)