Question

In: Accounting

It is commonly accepted that there are gains from adding securities to an investment portfolio. Explain...

It is commonly accepted that there are gains from adding securities to an investment portfolio. Explain what is meant by this statement. (your answer should include a discussion and example regarding systematic and non systematic risk as well as an indication of the optimal number of assets to be included within a portfolio in theory and in practice)

5 marks

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

(a) It is commonly accepted that there are gains from adding securities to an investment portfolio....
(a) It is commonly accepted that there are gains from adding securities to an investment portfolio. Explain what is meant by this statement. (Your answer should include a discussion and example regarding systematic and non‐systematic risk as well as an indication of the optimal number of assets to be included within a portfolio in theory and in practice.) Click or tap here to enter text. (b) The following table provides monthly percentage price changes for two well known market indexes....
a) It is commonly accepted that there are gains from adding securities to an investment portfolio....
a) It is commonly accepted that there are gains from adding securities to an investment portfolio. Explain what is meant by this statement. (Your answer should include a discussion and example regarding systematic and non‐systematic risk as well as an indication of the optimal number of assets to be included within a portfolio in theory and in practice.) ​​​​​ (b) The following table provides monthly percentage price changes for two well known market indexes. Month Russell 2000 Nikkei 1 0.04...
• Determine whether adding securities to the portfolio reduces the portfolio risk as measured by the...
• Determine whether adding securities to the portfolio reduces the portfolio risk as measured by the standard deviation and the benefits of diversification
1. Consider that you hold securities in a company that has just accepted an investment of...
1. Consider that you hold securities in a company that has just accepted an investment of $10 million in 6x liquidation at $3 million pre-money. How would you value this company if you were the “new money”? The previous investors? 2. If a mezzanine investor has received warrant coverage for 5 percent of a $3 million loan where the equity investors are paying $2.50 per share, how many shares will she be able to buy and at what price? 3....
enCo has the following securities in its investment portfolio on December 31, 2014. All these securities...
enCo has the following securities in its investment portfolio on December 31, 2014. All these securities were purchased in 2014. 800 shares of Benson Inc. common shares, which cost $50,400 and had a fair value of $52,300 at the end of 2014. JenCo accounts for this investment as available for sale. 3,000 shares of Southgate Inc. common stock, which cost $174,000 and had a fair value of $204,000 at the end of 2014. JenCo accounts for this investment as available...
Vaughn Company has the following securities in its investment portfolio on December 31, 2017 (all securities...
Vaughn Company has the following securities in its investment portfolio on December 31, 2017 (all securities were purchased in 2017): (1) 3,100 shares of Anderson Co. common stock which cost $55,800, (2) 9,600 shares of Munter Ltd. common stock which cost $547,200, and (3) 6,100 shares of King Company preferred stock which cost $250,100. The Fair Value Adjustment account shows a credit of $10,900 at the end of 2017. In 2018, Vaughn completed the following securities transactions. 1. On January...
You are an active investor in the securities market and you have established an investment portfolio...
You are an active investor in the securities market and you have established an investment portfolio of two stock A and B five years ago. Required: a) If your portfolio has provided you with returns of 9.7%, -6.2%, 12.1%, 11.5% and 13.3% over the past five years, respectively. Calculate the geometric average return of the portfolio for this period? (1 mark)? b) Assume that expected return of the stock A in your portfolio is 14.6%. The risk premium on the...
You are an active investor in the securities market and you have established an investment portfolio...
You are an active investor in the securities market and you have established an investment portfolio of two stock A and B five years ago. Required: a) If your portfolio has provided you with returns of 9.7%, -6.2%, 12.1%, 11.5% and 13.3% over the past five years, respectively. Calculate the geometric average return of the portfolio for this period? (1 mark)? b) Assume that expected return of the stock A in your portfolio is 14.6%. The risk premium on the...
Addison Manufacturing holds a large portfolio of debt securities as an investment. The fair value of...
Addison Manufacturing holds a large portfolio of debt securities as an investment. The fair value of the portfolio is greater than its original cost, even though some debt securities have decreased in value. Sam Beresford, the financial vice president, and Angie Nielson, the controller, are near year-end in the process of classifying for the first time this securities portfolio in accordance with GAAP. Beresford wants to classify those securities that have increased in value during the period as trading securities...
Addison Manufacturing holds a large portfolio of debt securities as an investment. The fair value of...
Addison Manufacturing holds a large portfolio of debt securities as an investment. The fair value of the portfolio is greater than its original cost, even though some debt securities have decreased in value. Sam Beresford, the financial vice president, and Angie Nielson, the controller, are near year-end in the process of classifying for the first time this securities portfolio in accordance with GAAP. Beresford wants to classify those securities that have increased in value during the period as trading securities...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT