As one moves to the right along an investor’s efficient frontier, a set increase in risk is most likely to lead to: A. Sequentially larger increases in expected return. B. Consistent increases in expected return. C. Sequentially smaller increases in expected return. D. None of the above is correct.
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7. As one moves to the right along an investor’s efficient frontier,
a set increase in risk is most likely to lead to:
A. Sequentially larger increases in expected return.
B. Consistent increases in expected return.
C. Sequentially smaller increases in expected return.
D. None of the above is correct.
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- What assumption about risk-adjusted techniques for measuring performance poses a potential problem? A. Portfolio risk is constant over time B. Returns are normally distributed C. Mean reversion D. None of the options are correct.A negative alpha would mean that a the portfolio have earned enough return given the amount of risk he was taking a. maybe b. it depends c. false d. true9) The measure of risk in a Markowitz efficient frontier is A) specific risk. B) standard deviation of returns. C) reinvestment risk. D) beta. Provide explanation for the accurate answer.
- The probability distribution of a less risky return is more peaked than that ofa riskier return. What shape would the probability distribution have for (a)completely certain returns and (b) completely uncertain returns?What is the relationship between correlation and the risk of the portfolio's rate of return? i. Higher correlation means greater risk reduction ii. Higher correlation means lower risk reduction iii. Lower correlation means lower risk reduction iv. Lower correlation means greater risk reduction v. None of the above18. If one were to plot the expected returns of assets (y axis) against the systematic risk (x-axis) and construct a frontier of investments, then the indifference curves of a risk-neutral investor would: Select one or more: a. Would be straight horizontal lines b. Would be undefined and impossible to plot on such a diagram c. Would increase in utility as you go up along the y-axis d. Would be straight vertical lines e. Coincide over top the efficient frontier boundary at all points f. Would increase in utility as you go left along the x-axis
- The probability distribution of a less risky expected return is more peaked than that of ariskier return. What shape would the probability distribution be for (a) completely certainreturns and (b) completely uncertain returns?An investment with a high return is likely to be high riskA. TrueB. FalseList which of the following statement(s) concerning risk are correct? 1. Nondiversifiable risk is measured by beta. II. The risk premium increases as diversifiable risk increases. III. Systematic risk is another name for nondiversifiable risk. IV. Diversifiable risks are market risks you cannot avoid.
- What is the answer to this question? For this question I have seen 2 answers. So im not sure whats right. Answer 1: The most relevant figure is (a) that reflects the risk-return characteristics of stock A and stock B. an effective frontier is called relationship between risk (standard deviation) and expected return. The shape of risk-return features is curved because for each incremental risk incurred there are raising marginal returns. Therefore, for each unit of risk, the standard deviation applied to the portfolio provides an extremely low amount of return. Also we can see that the SD of stock B is higher than that of A. Figure b) is incorrect because the returns don’t rise in proportion to the risk assumed. Figure c) is incorrect since both stocks stock A and stock B are risky, and thus a finite return cannot occur at standard deviation = 0 Answer 2 Answer - Graph B Correlation = Covariance / (Standard deviation of A x Standard deviation of B) Correlation = 0.0014 / (0.032 x 0.044)…Answer whether each of the following statements is correct and explain your argument. \ (a) According to CAPM, the expected return of a risky asset is larger than the risk free rate. (b) According to CAPM, the expected return of a risky asset increases with its variance. (c) According to the separation property, the optimal risky portfolio for an investor dependson the investor’s personal preference. (d) A less risk-averse investor has a steeper indifference curve for the utility function.The Markowitz Model is based on several assumptions regarding investor behaviour. Which of the following is NOT an assumption? Investors consider each investment alternative as being represented by a probability distribution of expected returns over some holding period. Investors maximize one-period expected utility. Investors estimate the risk of the portfolios on the basis of the variability of expected returns. Investors base decisions solely on expected return and risk. None of the above answers [all are assumptions of the Markowitz Model