As additional securities are added to a portfolio, total risk will generally ________ at a _________ rate.   Group of answer choices   rise; decreasing rise; increasing fall; decreasing fall; increasing

Q: Suppose that stocks are exposed to independent risks only so that stock has the following return…

A: Return from the Portfolio is given by Ri,t =mi+si,t where Ri,t= return on the portfolio           mi…

Q: The risk for a portfolio is decreased when the particular stocks tend to move up and down togethe-…

A: The collective investment basket which includes assets from different types as real and financial,…

Q: Risk and Return Suppose you hold an asset that delivers a return R;. You wish to hedge against a…

A: Each asset has different return as per their risk level. CAPM measures the asset return or portfolio…

Q: The risk for  ______________ portfolio is essentially equivalent to the systematic risk.   a. a…

A: Risk is an important part of finance in general and investing in particular.   Risks in investing…

Q: Draw the profit diagram (profit not payoff) of a portfolio consisting of a long position in two call…

A: The payoff diagram for a portfolio consisting of various long and short positions in call options…

Q: The difference between the forward rate and the expected future spot rate is called:

A: The forward rate is a price at which the transaction or settlement will take place in the future. It…

Q: As the number of stocks in a portfolio increase, the portfolio’s systematic risk can either increase…

A: Solution: When an investor invests in equity market, it get exposed to two types of risk- a)…

Q: What is the relationship between correlation and the risk of the portfolio's rate of return? i.…

A: Correlation represents the degree of relationship between the movement of prices of assets in a…

Q: The risk premium on the market portfolio will be proportional to _____________   I. the average…

A: The risk premium on the market portfolio is a fundamental concept in finance. It represents the…

Q: Which of the following statements regarding non-systematic risk, systematic risk and total risk…

A: Systematic risk is the risk derived from the market and which is measured by the beta of the stock…

Q: 5 Consider the following information: Probability of Rate of Return if State Occurs Economy…

A: The expected return is the amount of return expected from the investment. Standard deviation is a…

Q: Could a more optimal portfolio, that is, one containing some other combination of stocks that would…

A: The question is based on the concept of optimal portfolio, an optimal portfolio is a theoretical…

Q: 2) Since must be 1. The measures the stock's reactions to movements in the market, the beta for the…

A: Beta is measure of change in stock price with regard to change in market.  There are 2 types of…

Q: different scenarios are as follows: Scenario 1 2 3 4 5 A 0.11 -0.11 0.09 0.25 0.18 B -0.09 0.12 0.15…

A: Investors are risk adverse, and historical statistics show that financial markets price assets to…

Q: In a two-asset portfolio, a covariance of returns between the two securities will lead to the…

A: Adding assets which move in different directions reduces the overall risk. This is because there is…

Q: The beta of an investment measures the probability weighted expected rate of return of a portf True…

A: Beta is measure of the risk and volatility of the stock and show how much is change in return with…

Q: Which of the following is TRUE?     To construct a capital market line, we use expected return as…

A: Capital market line (CML) is a graph representing expected return vs Standard deviation.

Q: Consider following information on a risky portfolio, risk-free asset and the market index. What is…

A: A portfolio with all the characteristics has been provided. Capital market information are also…

Q: Select all that are true with respect to the historical risk-return tradeoff for portfolios, and for…

A: Portfolio refers to a bucket of assets in which different stocks, securities, bonds, commodities etc…

Q: 1.How does adding stocks to a portfolio affect its volatility?   2. What is the efficient…

A: 1 Adding stock to portfolio change volatility of portfolio if high beta stock are added than it…

Q: A portfolio that is positively correlated with the market portfolio but not particularly sensitive…

A: In statistics, +1.0 beta value represents a perfect positive correlation. 0 denotes no correlation…

Q: Increasing the number of stocks in a portfolio from 10 to 50 would most likely A. Increase the…

A: As the number of stocks in a portfolio increases the correlation between the stocks in the portfolio…

Q: When adding a randomly chosen new stock to an existing portfolio, the lesser (or more negative) the…

A: Answer: The given statement is True.

Q: calculate the beta of the portfolio below consisting of assets x, y and z. discuss the meaning of…

A: Beta of an asset represents the volatility with respect to the market. It measures the systematic…

Q: Please All option information and correct answer

A: When we talk about a portfolio consisting of multiple securities, the risk and return dynamics play…

Q: ma.4

A: The objective of the question is to identify what is measured by the beta of a security among the…

Q: Use the following table to answer the questions a-c below. Standard deviation of risky portfolio 3.5…

A: Note: We’ll answer the first question, including sub-parts since the exact one wasn’t specified.…

Q: Investors can choose one of the two independent investment assets, A and B. The payoff per unit…

A: The certainty equivalent of an investment is the certain payoff that an investor would be…

Q: Value-at-risk (VaR) can be defined as: Group of answer choices A. The highest value of a portfolio…

A: Portfolio refers to basket of different financial assets in which investment is made by single…

Q: As one adds more assets to a portfolio in order to achieve diversification, the portfolio's risk? O…

A: Diversification is a process in which investors add more assets which are not well correlated to…

Q: porfolios risk.

A: Stocks when added again & again to the portfolio would reduce the standard deviation & rp…

Q: . The difference between the expected (c equired) return for the market portfolio ar he risk-free…

A: This pertains to the CAPM (capital asset pricing model). The difference between expected return on a…

Q: risk premium (RP) expected return on a portfolio,r^P realized rate of return, r¨ diversification…

A: 1) Risk premium is the return you earn over and above the risk-free rate. It is calculated by…

Q: arket's Risk premium measures Select one: a. The market return plus the risk free rate. b. The…

A: The market risk premium represents the market participants demand extra return by increasing the…

Q: if asset A has lower volatility than asset B, then it contributes less to the overall volatility…

A: Volatility is change in expected rate of assets from the mean return and it shows the risk involved…

Q: A stock's risk has a component called _____________________, which can be minimized as we add more…

A: Systematic risk is the risk that refers to entire market and it is not avoidable. this risk arises…

Q: The expected return of a portfolio is simply the weighted average of the expected returns for the…

A: When investors create a portfolio of assets, one of the key metrics of interest is the expected…

Q: Suppose that stocks are exposed to systematic risks only so that stock i has the following return…

A: Return from the Portfolio is given by Ri,t =mi+si,t where Ri,t= return on the portfolio           mi…

Q: The risk associated with the overall market is referred to as _____ risk. a. unsystematic b.…

A: (a) Unsystematic risk also known as nonsystematic risk which refers to the risk that is unique for…

Q: An efficient portfolio is one that:   Select one: a.   maximises return for a given level of…

A: Efficient Portfolio is the Portfolio or group of stocks invested which maximises the expected rate…

Q: The slope of the security market line is the: Group of answer choices reward-to-risk ratio…

A: The security market line is the important concept when dealing with the relationship between the…

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.