- CFA Exams
- CFA Level I Exam
- Study Session 12. Equity Investments (1)
- Reading 37. Security Market Indices
- Subject 2. Index Construction and Management

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**CFA Practice Question**

A portfolio has two securities with 35% and 65% allocations by market value. The first security has a return of 8% and the second security has a return of 14%. What is the unweighted, geometrically average return for the portfolio?

A. 10.96%

B. 11.00%

C. 11.90%

**Explanation:**[(1 + .08) x (1 + .14)]

^{1/2}- 1 = 10.96%

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**User Contributed Comments**
10

User |
Comment |
---|---|

Bibhu |
unweighted is the important point here. |

Shelton |
a little less than 11% => B |

seemor |
How do I find 1/2 on my BA11 plus |

agnesemi |
use yx 0.5 |

whoi |
or, extract the root... |

Inf11B |
1/2 power is the same as the square root. I missed the "unweighted" too. |

threedot |
what is it was weighted? |

Bill12345 |
geometric is always less than average. |

farhan92 |
my niece ran away with my calculator...be prepared for this to happen in the exam |

bmahoney1 |
why would you even want to measure geometric return for two securities in ONE time period?... The answer is, you wouldn't. |