Evaluate the underlined words in italics

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Reference no: EM132063307

1. Assume your current portfolio has a Sharpe ratio of 1.50. You are considering adding a new asset to the portfolio which only has a Sharpe ratio of 1.25. The asset has a 0.80 correlation to the current portfolio. Based on this information alone, you should add the new asset to the portfolio. Evaluate the underlined words in italics.

A. True

B. False

2. Effective duration is more accurate during a low interest rate regime (e.g. the last decade) than it is for high interest rate regimes (e.g. the 1980s). One explanation of this relationship involves a bond’sprice convexity. Evaluate the underlined words in italics. True or False?

A. True

B. False

3. If all interest rates make an instantaneous parallel shift up, expect all bond yields and prices to rise together. Evaluate the underlined words in italics.

A. True

B. False

Reference no: EM132063307

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