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A portfolio is a group of assets in which investors prefer to deposit. The portfolio gives...

A portfolio is a group of assets in which investors prefer to deposit. The portfolio gives an opportunity to diversify risk. Diversification of risk does not mean that there will be an elimination of risk as future is always uncertain. With every asset, there is an attachment of systematic and unsystematic risk. Even an optimum portfolio cannot eliminate market risk, but can only reduce or eliminate the diversifiable risk.

a. Help Mr. X prospective investor to manage return and risk of a security portfolio.

b. Discuss the different types of inherent risks.

Solutions

Expert Solution

a. Portfolio Return is the weighted average return of each security. Portfolio risk consists of systematic and unsystematic risks.

b. Different types of inherent risks are Market risks, Interest rate risks and Purchasing Power risks.

jeff jeffy answered 1 month ago
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