The Sharpe ratio Select one: O is computed using idiosyncratic risk only O is computed using systematic risk only Ois maximized for the risk-free asset O is the highest for a minimum variance portfolio is the same along the capital market line
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- A plot/graph of the positive relation between systematic risk and expected return is called: O security market line standard deviation and width of the normal distribution O covariance graph O capital asset pricing modelIn the context of the Capital Asset Pricing Model (CAPM), the relevant measure of risk is A. standard deviation of returns. B. beta. C. variance of returns. D. unique risk.In the context of the capital asset pricing model, the systematic measure of risk is captured by _________. Group of answer choices unique risk beta standard deviation of returns variance of returns
- The slope of the Security Market Line equals to ____, and the slope of Capital Allocation Line equals to____. Select one: A. Beta; Sharpe Ratio B. Market Risk Premium; Sharpe Ratio C. Risk free rate; Volatility D. Market Risk Premium; VolatilityIt is a risk adjusted performance measure that represents the average return on a portfolio. a. sharpe ratio b. Treynor indexWhich of the following measures reflects the excess return earned on a portfolio per unit of its systematic risk a. Treynor’s measure b. Sharpe’s measure c. Jensen’s measure d. Total measure
- The appropriate measure of risk used in Sharpe's measure of portfolio evaluation is a. Range b. Variance c. Beta d. Standard deviationa)define market risk. b)define delta-hedged position and describe delta hedging. c)describe gamma hedging and vega hedging. d)define and explain value at risk (VAR). e)describe the analytical (variance-covariance) method of calculating VAR, and discuss its advantages and disadvantages.The Capital Asset Pricing Model (CAPM) asserts that an asset’s expected return is equal to the risk-free rate plus a risk premium for: a. Volatility b. Systematic risk c. Non-systematic risk d. Diversification e. Marginal utility of consumption
- There are two assets 1 and 2, with returns X and Y correspondingly. Return X is a random variable with mean 1 and variance 1; return Y is a random variable with mean 1 and variance 3. We know that the expectation of X*Y is equal to 0. Find the share of asset 1 in the risk-minimizing portfolio.The security market line has a slope equal to the a) Risk-free rate b) Market risk premium c) Beta coefficient d) Market rate of returnConsider two assets. Suppose that the return on asset 1 has expected value 0.05 and standard deviation 0.1 and suppose that the return on asset 2 has expected value 0.02 and standard deviation 0.05. Suppose that the asset returns have correlation 0.4.Consider a portfolio placing weight w on asset 1 and weight 1-w on asset 2; let Rp denote the return on the portfolio. Find the mean and variance of Rp as a function of w.
