Question
In: Finance
For diversified portfolios, which of the following is (are) false? a. the risk of a portfolio...
For diversified portfolios, which of the following is (are) false? a. the risk of a portfolio is less than the weighted average risk of the individual assets in the portfolio if the correlation coefficient is less than one. b. stock held in isolation is more risky than a stock held in a portfolio c. relevant risk of a stock is its contribution of risk to a portfolio d. the unique risk of a portfolio increases as more companies are added to the portfolio e. none of the above
Solutions
Expert Solution
d. the unique risk of a portfolio increases as more companies are added to the portfolio
This is incorrect because unique risk decreases with addition of more companies to the portfolio
jeff jeffy answered 2 years agoRelated Solutions
Which of the following types of risk cannot be eliminated by holding a well-diversified portfolio of...
Which of the following types of risk cannot be
eliminated by holding a well-diversified portfolio of
investments?
A
Diversifiable risk
B
Market risk
C
Portfolio risk
D
Answers a. and b. are correct.
E
Answers b. and c. are correct.
Which of the following portfolios would be off the efficient frontier? Expected Return Risk Portfolio A...
Which of the following portfolios would be off the efficient
frontier?
Expected Return Risk
Portfolio A 13% (er)17% (risk)
Portfolio B 12 (er) 18 (risk)
Portfolio C 18 (er) 30 (risk)
Consider the following data on a one-factor economy. All portfolios are well-diversified. Portfolio A has a...
Consider the following data on a one-factor economy. All
portfolios are well-diversified. Portfolio A has a beta of 1.0 and
an expected return of 11%, while another portfolio B has a beta of
0.75 and an expected return of 8%. The risk-free rate is 2%. In
this scenario, an arbitrage opportunity exists and a strategy to
take advantage of it would be:
To short B and use 3/4 of the proceeds to invest in A and borrow
the other ¼...
Why is it important to invest in a diversified portfolio? Which stock risk measure should you...
Why is it important to invest in a diversified portfolio? Which
stock risk measure should you care about if you have a diversified
portfolio? Can you eliminate all portfolio risk?
Which of the following types of risk is the least important risk for a diversified investor?...
Which of the following types of risk is the least important risk
for a diversified investor?
A:) systematic risk
B:) Undiversifiable risk
C:) market risk
D:) idiosyncratic risk
Consider the following four portfolios: Portfolio A has $950 invested in the risk free asset and...
Consider the following four portfolios:
Portfolio A has $950 invested in the risk free
asset and $50 invested in the market.
Portfolio B has $5,000 invested in the risk
free asset and $5,000 invested in the market portfolio.
Portfolio C has $25,000 invested in the risk
free asset and $75,000 invested in the market portfolio.
Portfolio D has borrowed $500,000 at the risk
free rate (e.g., W(risk free) = -50%) and has invested $1,500,000
in the market portfolio.
Assume that...
Which of the following is not a determinant of the risk of a portfolio? A) the...
Which of the following is not a determinant of the risk of a
portfolio?
A) the amount of money invested in each asset in the
portfolio
B) the degree to which the returns of the assets in the
portfolio move together
C) the expected returns on the individual assets in the
portfolio
D) the number of assets in the portfolio
Which of the following is NOT a determinant of the risk of a portfolio? A. The...
Which of the following is NOT a determinant of the risk of a
portfolio?
A. The amount of money invested in each asset in the
portfolio.
B. The degree to which the returns of the assets in the
portfolio move together.
C. The expected returns on the individual assets in the
portfolio.
D. The number of assets in the portfolio.
E. Both C & D.
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset:...
You are given the following information concerning three
portfolios, the market portfolio, and the risk-free asset:
Portfolio
RP
σP
βP
X
12.5
%
38
%
1.45
Y
11.5
33
1.15
Z
9.4
23
0.80
Market
11.9
28
1.00
Risk-free
6.2
0
0
What are the Sharpe ratio, Treynor ratio, and Jensen’s alpha for
each portfolio? (A negative value should be indicated by a
minus sign. Leave no cells blank - be certain to enter "0" wherever
required. Do not round...
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset:...
You are given the following information concerning three
portfolios, the market portfolio, and the risk-free asset:
Portfolio
Rp
σp
βp
X
12.5
%
38
%
1.45
Y
11.5
33
1.15
Z
9.4
23
.80
Market
11.9
28
1.00
Risk-free
6.2
0
0
What are the Sharpe ratio, Treynor ratio, and Jensen’s alpha for
each portfolio? (A negative value should be indicated by a
minus sign. Leave no cells blank - be certain to enter "0" wherever
required. Do not round...
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