Question
If a client wants to outperform the S&P 500 by 100 bps, what type of return objective is that?
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Answer
A relative return objective.
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Question
If a portfolio is just one part of a larger diversified wealth portfolio, which performance measure is usually more appropriate?
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Answer
Treynor ratio.
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Question
What does it mean for a defined benefit plan to be underfunded?
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Answer
Plan assets are less than the present value of liabilities.
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Question
Why does the CML apply only to efficient, fully diversified portfolios?
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Answer
Because it uses total risk, which is relevant for efficient portfolios.
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