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  • Exam Code: C_C4H320_02
  • Exam Name: SAP Certified Application Associate - SAP Commerce Cloud Business User

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NEW QUESTION: 1
When estimating the risk of a portfolio of equities using the portfolio's beta, which of the following is NOT true:
A. relies upon the single factor CAPM model
B. use of the beta assumes that the portfolio is diversified enough so that the specific risks of the individual stocks offset each other
C. explicitly considers specific risk inherent in the portfolio for risk calculations
D. using the beta significantly eases the computational burden of calculating risk
Answer: C
Explanation:
Explanation
Using the beta for VaR calculations is a significant simplification based on the CAPM and the assumption that any specific risks are diversified away. The one thing a risk model based on the CAPM does not consider is the specific risk of individual stocks, because, as mentioned, these are considered to be offsetting each other so that the portfolio only carries market risk reflected in the beta.
Therefore Choice 'c' is not true and therefore the correct answer.

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