Question
In: Finance
Portfolio A has a higher total risk but lower total return than the market portfolio. which...
Portfolio A has a higher total risk but lower total return than the market portfolio. which of the following is least likely?
| A. |
Portfolio has a beta that is lower than 1. |
|
| B. |
Portfolio A has a relatively high unsystematic risk. |
|
| C. |
Portfolio A cannot possibly lie on the SML (security market line). |
Martha Stevens, CFA, is an investment manager who uses her friend, Robert James, exclusively for her clients' brokerage transactions. James provides better services than other brokers in return for a slightly higher price, which Stevens believes is justified. Which of the following statements is most accurate?
| A. |
Stevens is in violation of Standard III (A): Loyalty, Prudence, and Care. |
|
| B. |
Stevens is in violation of Standard III (B): Fair Dealing. |
|
| C. |
Steven has not violated any standard. |
Solutions
Expert Solution
Ans:
Option A
Reason : When portfolio A has higher total risk then it is not possible to have beta less than 1. It should be greater than 1.
Option C
Reason : as per standard III(A) and III(B) Steven not violating any rule as he is giving quality service over just service. So it is fair to charge more for quality from customers.
jeff jeffy answered 2 years agoRelated Solutions
question 12: The risk of a portfolio can be lower than the risk of the two...
question 12:
The risk of a portfolio can be lower than the risk of the two
individual components that make up the portfolio when
a.
the return of the two components are negatively related.
b.
the return of the two components are positively related.
c.
the risk of one of the components is much lower than the risk of
the other.
d.
the risk of one of the components is much higher than the risk
of the other.
e.
the...
If the net convenience yield is lower than 100% but higher than the risk free rate...
If the net convenience yield is lower than 100% but higher than
the risk free rate
Group of answer choices
The future rate for a commodity should be higher than the spot
price of the commodity.
The future rate should be negative
The future rate of the commodity will converge to zero as the
maturity of the contract goes to infinity.
None of the above.
Consider Asset A and B, which asset has higher systematic risk? Which one has higher total...
Consider Asset A and B, which asset has higher systematic risk?
Which one has higher total risk? Show your calculations. Assume the
market risk premium is 8 percent, the risk-free rate is 4 percent,
and the capital asset pricing model holds. (Rounding your answers
to four decimal places)
State of Economy
Probability of State of Economy
Rate of Return if State Occurs
Asset A
Asset B
Recession
0.10
0.02
-0.25
Normal
0.70
0.25
0.09
Irrational exuberance
0.20
0.05
0.40
(i) Which security has greater total risk? Which has greater systematic risk? Which has greater unsystematic risk? Which security will have a higher risk premium?
(i) Which security has greater total risk? Which has greater systematic risk? Which has greater unsystematic risk? Which security will have a higher risk premium?(ii) Construct a two-asset equally weighted portfolio is minimising the overall risk. What is the portfolio's Beta? What is the standard deviation of the portfolio?(iii) Calculate the Sharpe ratios for the three securities and the equally weighted portfolio in part ii. Is it possible to build a two-asset equally weighted portfolio with a higher Sharpe ratio...
What is the Sharpe approach to measuring portfolio risk? If a portfolio has a higher Sharpe...
What is the Sharpe approach to measuring portfolio risk? If a
portfolio has a higher Sharpe measure than the market in general
under the Sharpe approach, what is the implication?
Consider an APT world with one systematic risk: MARKET risk. Expected return for the market portfolio...
Consider an APT world with one systematic risk: MARKET risk.
Expected return for the market portfolio is 8% and risk-free rate
is 2%. A stock analyst estimates the following characteristics for
the Portfolio ABC. Assume that the analyst estimates are
correct.
Portfolio
E(R)
Market BETA
ABC
11.0%
1.8
What is the NO-ARBITRAGE (i.e. in equilibrium) expected return for
portfolio ABC?
10.0%
10.5%
11.0%
12.0%
12.8%
The risk-free rate of return is 6%, the expected rate of return on the market portfolio...
The risk-free rate of return is 6%, the expected rate of return
on the market portfolio is 15%, and the stock of Xyrong Corporation
has a beta coefficient of 2.3. Xyrong pays out 45% of its earnings
in dividends, and the latest earnings announced were $9.00 per
share. Dividends were just paid and are expected to be paid
annually. You expect that Xyrong will earn an ROE of 18% per year
on all reinvested earnings forever.
a. What is the...
The risk-free rate of return is 10.0%, the expected rate of return on the market portfolio...
The risk-free rate of return is 10.0%, the expected rate of
return on the market portfolio is 17%, and the stock of Xyrong
Corporation has a beta coefficient of 1.6. Xyrong pays out 30% of
its earnings in dividends, and the latest earnings announced were
$15 per share. Dividends were just paid and are expected to be paid
annually. You expect that Xyrong will earn an ROE of 20% per year
on all reinvested earnings forever.
a. What is the...
The risk-free rate of return is 6%, the expected rate of return on the market portfolio...
The risk-free rate of return is 6%, the expected rate of return
on the market portfolio is 14%, and the stock of Xyrong Corporation
has a beta coefficient of 1.3. Xyrong pays out 50% of its earnings
in dividends, and the latest earnings announced were $8.00 per
share. Dividends were just paid and are expected to be paid
annually. You expect that Xyrong will earn an ROE of 15% per year
on all reinvested earnings forever.
a. What is the...
The risk-free rate of return is 9.0%, the expected rate of return on the market portfolio...
The risk-free rate of return is 9.0%, the expected rate of
return on the market portfolio is 14%, and the stock of Xyrong
Corporation has a beta coefficient of 2.0. Xyrong pays out 50% of
its earnings in dividends, and the latest earnings announced were
$20 per share. Dividends were just paid and are expected to be paid
annually. You expect that Xyrong will earn an ROE of 18% per year
on all reinvested earnings forever.
a. What is the...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Make-or-Buy Decision Fremont Computer Company has been purchasing carrying cases for its portable computers at a...
- The following costs were incurred for the single product produced during the first year of operations...
- Non-constant growth model: Do=$2.00 required return on equity= 5% g= 9% n=1,2 g=7% n=3,4 g=3% n=5...
- . Find all x ∈ Z143 such that x2Ξ 7 (mod 143). Please explain all steps...
- #Python: A palindrome is a sequence of characters that reads the same backwards as forwards. For...
- Explain an example in which a variable has two different addresses at different places in a...
- Hadley, a thirty-five-year-old physician, has worked at Princeton Plainsboro Hospital for six years. She recently received...
ADVERTISEMENT