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LG4 5-14 Correlation, risk, and return Matt Peters wishes to evaluate the risk and return behaviors...
Correlation, risk, and return Matt Peters wishes to evaluate the risk and return behaviors associated with...
Correlation, risk, and return Matt Peters wishes to evaluate the risk and return behaviors associated with various combinations of assets V and W under three assumed degrees of correlation: perfectly positive, uncorrelated, and perfectly negative. The expected return and risk values calculated for each of the assets are shown in the following table, B a. If the returns of assets V and W are perfectly positively correlated correlation coefficient = +1), describe the range of (1) expected return and (2)...
Assume you wish to evaluate the risk and return behaviors associated with various combinations of assets...
Assume you wish to evaluate the risk and return behaviors associated with various combinations of assets V and W under three assumed degrees of correlation: perfect positive, uncorrelated, and perfect negative. The following average return and risk values were calculated for these assets: Asset Average Return, r Risk (Standard Deviation), s V 7.9% 4.6% W 12.7% 9.7% a. If the returns of assets V and W are perfectly positively correlated (correlation coefficient = + 1), describe the range of...
le three alternatives. c. Use your findings in parts a and b to calculate the coefficient of variatio each of the three...
le three alternatives. c. Use your findings in parts a and b to calculate the coefficient of variatio each of the three alternatives. d. On the basis of your findings, which of the three investment alternatives do recommend? Why? LG 4 P8-15 Correlation, risk, and return Matt Peters wishes to evaluate the risk and return be haviors associated with various combinations of assets V and W under three as- sumed degrees of correlation: perfectly positive, uncorrelated, and perfectly negative The...
Assume you wish to evaluate the risk and return behaviors associated with various combinations of two stocks, Alpha Sof...
Assume you wish to evaluate the risk and return behaviors associated with various combinations of two stocks, Alpha Software and Beta Electronics, under three possible degrees of correlation: perfect positive, uncorrelated, and perfect negative. The average return and standard deviation for each stock appears here: Asset Average Return,overbar r Risk (Standard Deviation), s Alpha 5.1% 30.3% Beta 11.2% 50.5% a. If the returns of assets Alpha and Beta are perfectly positively correlated (correlation coefficient equals plus 1),...
p8-15 A-C 333 CHAPTER 8 Risk and Return a. If the returns of assets V and...
p8-15 A-C
333 CHAPTER 8 Risk and Return a. If the returns of assets V and W are perfectly positively correlated (correlation coefficient = +1), describe the range of (1) expected return and (2) risk associ- ated with all possible portfolio combinations. b. If the returns of assets V and W are uncorrelated (correlation coefficient = 0), describe the approximate range of (1) expected return and (2) risk associated with all possible portfolio combinations c. If the returns of assets...
A correlation coefficient of .068 would indicate that
A correlation coefficient of .068 would indicate thata 6.8% return would be earned with the investmentthe returns are virtually uncorrelatedthe risk of the investment portfolio is almost zerothe returns are strongly (almost perfectly) positively correlated
2. 3: Risk and Rates of Return: Risk in Portfolio Context Risk and Rates of Return:...
2. 3: Risk and Rates of Return: Risk in Portfolio Context Risk
and Rates of Return: Risk in Portfolio Context The capital asset
pricing model (CAPM) explains how risk should be considered when
stocks and other assets are held . The CAPM states that any stock's
required rate of return is the risk-free rate of return plus a risk
premium that reflects only the risk remaining diversification. Most
individuals hold stocks in portfolios. The risk of a stock held in...
Term Answer Description Risk A. The potential for variability in the possible outcomes associated with an...
Term Answer Description Risk A. The potential for variability in the possible outcomes associated with an investment. Expected rate of return The portion of an asset's total expected return required by investors as compensation for assuming the additional risks associated with the security, the issuer, and the marketplace. Beta coefficient That portion of an investment's risk calculated as the difference between its total risk and its firm-specific risk. Market risk The mean of the probability distribution of an investment's possible...
Ch 02: Assignment - Risk and Return: Part 1 Term Answer Risk A Expected rate of...
Ch 02: Assignment - Risk and Return: Part 1 Term Answer Risk A Expected rate of return B Description The rate of return expected to be realized from an investment, calculated as the mean of the probability distribution of its possible returns. The term applied to the risk of an asset that is measured by the standard deviation of the asset's expected returns. The possibility that an actual outcome will be better or worse than its expected outcome The general...
1. Perfectly ________ correlated series move exactly together and have a correlation coefficient of ________, while perf...
1. Perfectly ________ correlated series move exactly together and have a correlation coefficient of ________, while perfectly ________ correlated series move exactly in opposite directions and have a correlation coefficient of ________. A. negatively; -1; positively; +1 B. negatively; +1; positively; -1 C. positively; -1; negatively; +1 D. positively; +1; negatively; -1 2. If two assets having perfectly negatively correlated returns are combined in a portfolio, then some combination of those two assets will ________. A. have more risk than...
Correlation, risk, and return Matt Peters wishes to evaluate the risk and return behaviors associated with various combinations of assets V and W under three assumed degrees of correlation: perfectly positive, uncorrelated, and perfectly negative. The expected return and risk values calculated for each of the assets are shown in the following table, B a. If the returns of assets V and W are perfectly positively correlated correlation coefficient = +1), describe the range of (1) expected return and (2)...
le three alternatives. c. Use your findings in parts a and b to calculate the coefficient of variatio each of the three alternatives. d. On the basis of your findings, which of the three investment alternatives do recommend? Why? LG 4 P8-15 Correlation, risk, and return Matt Peters wishes to evaluate the risk and return be haviors associated with various combinations of assets V and W under three as- sumed degrees of correlation: perfectly positive, uncorrelated, and perfectly negative The...
p8-15 A-C
333 CHAPTER 8 Risk and Return a. If the returns of assets V and W are perfectly positively correlated (correlation coefficient = +1), describe the range of (1) expected return and (2) risk associ- ated with all possible portfolio combinations. b. If the returns of assets V and W are uncorrelated (correlation coefficient = 0), describe the approximate range of (1) expected return and (2) risk associated with all possible portfolio combinations c. If the returns of assets...
2. 3: Risk and Rates of Return: Risk in Portfolio Context Risk
and Rates of Return: Risk in Portfolio Context The capital asset
pricing model (CAPM) explains how risk should be considered when
stocks and other assets are held . The CAPM states that any stock's
required rate of return is the risk-free rate of return plus a risk
premium that reflects only the risk remaining diversification. Most
individuals hold stocks in portfolios. The risk of a stock held in...
Term Answer Description Risk A. The potential for variability in the possible outcomes associated with an investment. Expected rate of return The portion of an asset's total expected return required by investors as compensation for assuming the additional risks associated with the security, the issuer, and the marketplace. Beta coefficient That portion of an investment's risk calculated as the difference between its total risk and its firm-specific risk. Market risk The mean of the probability distribution of an investment's possible...
Ch 02: Assignment - Risk and Return: Part 1 Term Answer Risk A Expected rate of return B Description The rate of return expected to be realized from an investment, calculated as the mean of the probability distribution of its possible returns. The term applied to the risk of an asset that is measured by the standard deviation of the asset's expected returns. The possibility that an actual outcome will be better or worse than its expected outcome The general...
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