Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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- Explain the difference between expected rate of return, required rate of return, and historical rate of return when applied to common stock.arrow_forwardA portfolio's manager's views on the term structure of interest rates: "Yields reflect expected spot rates and risk premiums. Investors demand risk premiums for holding long-term bonds, and these risk premiums increase with maturity. This manager's views are most consistent with the: A. Segmented markets theory B. Local expectations theory C. Preferred habitat theory OD. Liquidity preference theoryarrow_forwardDescribe how adding a risk-free security to modern portfolio theory allows investors to do better than the efficient frontier. Additionally, explain how might the magnitude of the market risk premium impact people's desire to buy stocks?arrow_forward
- Which of the following statements is CORRECT? a. Lower beta stocks have higher required returns. b. A stock's beta indicates its diversifiable risk. c. Diversifiable risk cannot be completely diversified away. d. Two securities with the same stand-alone risk must have the same betas. e. The slope of the security market line is equal to the market risk premium.arrow_forwardIf markets are efficient then: All stocks will have the same expected returns All stocks will have the same risk Two stocks will the same volatility will have the same expected returns Two stocks with the same priced risks will have the same expected returnsarrow_forwardcan be progressively eliminated by adding stocks to a portfolio? Systematic risk Specific risk Market risk Inflation rate riskarrow_forward
- Investors can use certain metrics to assess a stock or stock portfolio's risk. One of them is the Sortino ratio. What is this ratio and what is unique in its measurement?arrow_forwardLet's explore the difference between "expected" and "actual" return of a stock. 1) How might we calculate what the expected return of a stock should be? 2) How might we calculate the "actual" return of a stock?arrow_forwardHow do you calculate conditional volatility of a stock returns?arrow_forward
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