Discuss which type of risk matters to rational investors and why. In addition, explain how investing...
Discuss which type of risk matters to rational investors and why. In addition, explain how investing in more than one asset can reduce risk through diversification.
short and correct answer please
Homework Answers
Investors are subject to face market risk, reinvestment risk, volatility risk, risk due to imbalance in equity and debt (non- diversification risk) etc. To balance the risk and return , a portfolio needs to have company shares held from different business lines of different industries. As one company's loss may be balanced off by other industrial gain. Shares invested in Oil and Energy can be tagged with Shares invested in Pharmaceuticals. Also a fund can be maintained by including debt and equity within it's portfolio. Thus this can avoid non-diversification risk to the rational investors.
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Discuss which type of risk matters to rational investors and
why. In addition, explain how investing...
1. Explain why cash flows occurring at different times must be adjusted to reflect their value...
1. Explain why cash flows occurring at different times must be adjusted to reflect their value as of a common date before they can be compared, and be able to calculate the present value and future value of multiple cash flows 2. Explain the relationship between interest rates and bond prices. Why are long-term bonds more sensitive to changes in interest rates than shorter-term bonds? 3. How are preferred shares different from ordinary shares? How do you estimate the required...
PLEASE EXPLAIN WHY ANSWER IS TRUE OR FALSE: "Risk aversion" implies that investors require higher expected...
PLEASE EXPLAIN WHY ANSWER IS TRUE OR FALSE: "Risk aversion" implies that investors require higher expected returns on riskier than on less risky securities. a. True b. False When adding a randomly chosen new stock to an existing portfolio, the higher (or more positive) the degree of correlation between the new stock and stocks already in the portfolio, the less the additional stock will reduce the portfolio's risk. a. True b. False An individual stock's diversifiable risk, which is measured...
Investors can reduce risk by holding more than one asset in a portfolio. True or false?
Investors can reduce risk by holding more than one asset in a portfolio. True or false?
Which of the following statements regarding liquidity risk in correct? Explain why Asset liquidity risk arises...
Which of the following statements regarding liquidity risk in correct? Explain why Asset liquidity risk arises when a financial institution cannot meet payment obligations. Flight to quality is usually reflected in a decrease in the yield spread between corporate and government debt issuances. Yield spread between on-the-run and off-the-run securities mainly captures the liquidity premium. Funding liquidity risk can be managed by setting limits on certain asset markets or products and by means of diversification.
Please make sure the answer isn't copied from a previous answer. Define diversification and explain how...
Please make sure the answer isn't copied from a previous answer. Define diversification and explain how it is used to reduce risk. Additionally, explain how different asset classes and the number of securities can influence risk management.
Question 4 How can you reduce risk through diversification? by combining investments whose returns do not...
Question 4 How can you reduce risk through diversification? by combining investments whose returns do not move together and thus are not perfectly positively correlated by combining investments whose returns move together and thus are perfectly positively correlated by investing all the money in a single asset whose returns are abnormally high None of the above
Please TYPE your answer and please give the correct answer. Thank you! Discuss the rational subgroup...
Please TYPE your answer and please give the correct answer. Thank you! Discuss the rational subgroup concept and the part that it plays in the design of control charts. Also, explain whether, when taking samples or subgroups from a process, you should seek to have assignable causes occurring within the subgroups or between them.
Please explain in detail : Explain how the statistic matters in marketing. Think about the following...
Please explain in detail : Explain how the statistic matters in marketing. Think about the following when composing your answer: What is so interesting about it? Why should we as marketers in that particular industry care about these particular findings/trends? What can they do with it?
Identify and briefly discuss 2 key issues raised in "Why not 100 percent equities?" by Clifford...
Identify and briefly discuss 2 key issues raised in "Why not 100 percent equities?" by Clifford Asness. (8 pts) In a 1994 article "College and University Endowment Funds! Why Not 100% Equities?" Richard H. Thaler and J. Peter Williamson presented strong evidence documenting the historical superiority of investing in 100% equities compared with a more common investment policy of 6096 equities and 40% bonds (60/40). However, their recommendation that endowments invest in 100% equities actually mixes two distinctly different ideas:...
The scroll down options are 1. systematic/unsystematic risk 2. systematic/unsystematic risk 3. standard deviation/risk aversion 4....
The scroll down options are
1. systematic/unsystematic risk
2. systematic/unsystematic risk
3. standard deviation/risk aversion
4. correlation coefficient/diversification
Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk- free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability...
Question 4 How can you reduce risk through diversification? by combining investments whose returns do not move together and thus are not perfectly positively correlated by combining investments whose returns move together and thus are perfectly positively correlated by investing all the money in a single asset whose returns are abnormally high None of the above
Identify and briefly discuss 2 key issues raised in "Why not 100 percent equities?" by Clifford Asness. (8 pts) In a 1994 article "College and University Endowment Funds! Why Not 100% Equities?" Richard H. Thaler and J. Peter Williamson presented strong evidence documenting the historical superiority of investing in 100% equities compared with a more common investment policy of 6096 equities and 40% bonds (60/40). However, their recommendation that endowments invest in 100% equities actually mixes two distinctly different ideas:...
The scroll down options are
1. systematic/unsystematic risk
2. systematic/unsystematic risk
3. standard deviation/risk aversion
4. correlation coefficient/diversification
Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk- free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability...
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