ional investors will never choose a portfolio low the minimum variance point. Also show at this holds true regardless of whether risk- erse investors would have different attitudes yards risk

Q: Why will the standard deviation not be a good measure of risk when returns are negatively skewed

A: The standard deviation of returns is a measure of the volatility of market returns and determines…

Q: QUESTION 8 The market risk measure in the CAPM is: O Alpha O Beta O The standard deviation of HPRS O…

A: Note: This post has two distinct questions. The first, Q8 has been answered below.

Q: hich of the following would not be acceptable as a measure of basic investment risk? a)Expected…

A: Risk is always there when you invest in stock returns and risk is volatility of returns and change…

Q: The empirical SML is too flat relative to what CAPM predicts. Researchers have focused on which two…

A: The empirical Security Market Line (SML) is a representation of the relationship between systematic…

Q: Optimal portfolios can be obtained without diversification. True or false?

A: optimal portfolio are the one that minimises the risk for given level of return.

Q: All things remaining equal, a risk averse investor who is less risk tolerant would prefer an…

A: Risk Averse Investors are the investors which prefers to earn less returns with known risk or low…

Q: Hello The first question is to how to the formula used in this problem. This is a question that you…

A: Beta and standard deviation both are common measures which are used to find changes in stock but…

Q: Which two portfolios lie on the same indifference curve? Ignore feasibility. Expected Return, E(r) N…

A: The theory of Efficient Frontier is concerned with considering a cluster of investments and then…

Q: Can you provide economic reasons as to why the Beta and the return Variance rankings of a stock…

A: Capital asset pricing model classifies risks into two types. 1. Systematic risk 2. Unsystematic…

Q: xplain what is meant by the term ‘financial distress’. If we assume that financial distress exists,…

A: Explain what is meant by the term ‘financial distress’ Answer: Meaning of  'Financial distress' -…

Q: Money-market covered hedges can have variable outcomes while options are certain.   Group of answer…

A: Money market hedge is the hedging technique of locking the future value od exchange rate using money…

Q: What happens to the SML graph when risk aversion increasesor decreases?

A: Risk Aversion: The ability of a human being to avoid the risk and eventually reducing losses that…

Q: Are you agree with the phrase(sentence): "The indifference (exchange) risk - return curve slop of a…

A: Exchange rate indifference curve indicates that the change in demand for goods and services with…

Q: What is efficient set? Explain why rational investors will never chose a portfolio below the minimum…

A: What is efficient set?  Various configurations of securities yield various degrees of returns. The…

Q: Well-diversified portfolios have negligible Multiple Choice O unsystematic risks.

A: Diversified Portfolio is a type of investment portfolio wherein the amount which is required to be…

Q: 1. Which of the following statements is false? a. Risk neutrality means that an investor are not…

A: When making investments the concerned investor is looking for a desired rate of return. Risks are…

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: fter combining a riskfree asset with the efficient frontier of risky portfolios, you no longer need…

A: Step 1 The effective limit of a set of relevant portfolios provides the highest expected return on a…

Q: Which of the following is TRUE?     You should choose a stock with the greater Jensen’s alpha…

A: Jenson's alpha, Treynor ratio, Sharpe ratio are the portfolio measurement ratios which measures the…

Q: Assume that CAPM does not hold and securities may earn abnormal returns. Suppose security A has a…

A: CAPM: It is a model that shows the relationship between the systematic risk & expected return of…

Q: 1. The diversifiable risk of a portfolio: a. Is correlated with systematic risk. b. Can be made…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: A change in the risk premium, E(Rm) - Rf, results in... Group of answer choices 1. A change in…

A: concept. security market line (SML)  gives the market’s expected return at different levels of…

Q: Your friend’s portfolio consistently plots above the Security Market Line. As a result, your friend…

A: The securities which are plotting above the security market line is considered undervalued in nature…

Q: sk is the potential for an investment to generate more than one return. A security that will produce…

A: While investment there are potential risk to the investment due to which return realized vary…

Q: A sound risk mitigation plan improves the DCF, as it lowers the risk premium in the discount factor.

A: Discounted cashflow:Discounted Cash Flow (DCF) analysis is a valuation method that calculates the…

Q: Explain Payment Caps and Negative Amortization?

A: Payment Caps: A payment cap is a customer protection that bounds the amount that your monthly…

Q: be regarded as high risky when

A: Risk and return are positively correlated. If the risk for an investment is high, the more will be…

Q: investments with low return variances usually: a. have a high return standard deviation b. have…

A: d. none of these options   SINCE THE INVESTMENTS WITH  LOW RETURN VARIANCE HAS LOW STANDARD…

Q: What are the factors in determining the expected rate of return of LPs? Group of answer choices a.…

A: Limited partners (LPs) are investors in a limited partnership, such as a venture capital (VC) fund…

Q: 1. a. Prove rigorously "Constant relative risk aversion CRRA implies decreasing absolute risk…

A: The Constant Relative Risk Aversion (CRRA) utility function is provided by W, where W signifies…

Q: If the assumptions underlying the CAPM hold, then an implication from the model is that: A)…

A: The CAPM shows the relationship between the Systematic risk and the return expected by the…

Q: A portfolio comprised of two perfectly negatively correlated assets will always offer zero risk.…

A: Portfolio refers to a combination or collection of financial instruments or securities being stocks,…

Q: Which of the following statements is correct?   A) A minimum-variance hedge leads to no hedging…

A: Minimum-variance hedge ratio  or optimal hedge ratio is the ratio to evaluate the correlation in the…

Q: In the context of CAPM, a risky asset with negative beta (beta<0) will have a positive expected…

A: CAPM describes the relationship between risk of security and expected return. CAPM is the expected…

Q: Along the CAL you can choose different combinations from the same risky asset and risk-free asset -…

A: Capital Allocation Line is a graphical representation of a combination of risk free asset and risky…

Q: If we are speaking about the CAPM model and undiversifiable risks.    Then what is meant by…

A: CAPM model The Capital asset pricing model (CAPM) refers to an idea that describes the systematic…

Q: O The market rate of return. O Zero rate of return. A negative rate of return. O The risk-free rate.

A: Expected rate on security depends on the risk free rate and market rate and risk related to security…

Q: 3. The beta for the risk-free investment is closest to: A) 1. B) 0. C) Unable to answer this…

A: Beta is a measure of systematic risk which cannot be eliminated through diversification.  In other…

Q: The CAPM states that expected returns depend on an asset’s loading on market risk.

A: CAPM stands for capital asset pricing model. This model was developed by William. F. Sharpe. As per…

Q: The slope of the security market line cannot be negative. Begin your answer with Consistent or…

A: The slope of the security market line is inconsistent with the market changes.

Q: A change in the risk premium, E(Rm) - Rf, results in... a) A change in the vertical intercept of…

A: concept. The security market line (SML)  gives the market’s expected return at different levels of…

Q: An increase in investor risk aversion would be expected to: Increase the Risk-Free Rate while…

A: We have to assess the impact of the increase in risk aversion on risk free rate and expected return…

Q: 1.) Which is false concerning standard deviation? a. The smaller the standard deviation is the less…

A: Standard deviation measures the deviations of dataset from the expected mean . In finance, standard…

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.