Tom wishes to calculate the riskiness of his portfolio, which is comprised of equal amounts of...
Tom wishes to calculate the riskiness of his portfolio, which is comprised of equal amounts of two stocks. Which of the following measures would you recommend?
A.
Weighted average standard deviations
B.
A weighted average of the correlation between the two securities
C.
Weighted average betas of the two securities
D.
A weighted average of the coefficients of variation
E.
The slope of the security market line
Homework Answers
I WOULD RECOMMENDED (C)
Weighted average betas of the two securities as it helps in calculation of overall risk associated with the complete portfolio in respect to the benchmark index.
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Tom wishes to calculate the riskiness of his portfolio, which
is comprised of equal amounts of...
You are comparing five separate portfolios comprised of two stocks each that have varying characteristics. Which...
You are comparing five separate portfolios comprised of two stocks each that have varying characteristics. Which characteristic is most indicative of a diversified portfolio? a. The standard deviation of the portfolio equals the weighted average standard deviation of the two securities. b. The correlation between the two securities is equal to zero. c. The covariance of the two securities is equal to one. d. There is a highly positive covariance between the two securities. e. The correlation between the two...
(e) Two securities with the same standard deviations can have different betas. (f) Two securities that...
(e) Two securities with the same standard deviations can have different betas. (f) Two securities that have the same correlation coefficients with the market portfolio will have the same betas. (g) The return on a share with a beta of zero is expected to vary directly with the return on the market portfolio. (h) The equation for the security market line when the expected return on the market is 15% and the risk-free rate is 6% is rį = 9...
Which of the following statements is FALSE regarding the risk of a portfolio comprised of two...
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In relation to the CAPM, indicate for each of the following statements whether it is true...
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Just Answers Need ASAP Question 41 You want to create a $65,000 portfolio comprised of two...
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and Rates of Return: Risk in Portfolio Context The capital asset
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(e) Two securities with the same standard deviations can have different betas. (f) Two securities that have the same correlation coefficients with the market portfolio will have the same betas. (g) The return on a share with a beta of zero is expected to vary directly with the return on the market portfolio. (h) The equation for the security market line when the expected return on the market is 15% and the risk-free rate is 6% is rį = 9...
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Which of the following statements is FALSE? OA The expected return of a portfolio is equal to the weighted average expected retum, but the volatility of a portfolio is less than the weighted average volatility OB. The overall variability of the portfolio depends on the total co-movement of the stocks within it OC Each security contributes to the volatility of the portfolio according to tavoletity, cated by its covariance with the portfolio, which adust for the fraction of the total...
A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y. The covariance between Stock X and Stock Y is 0.10. The standard deviation of Stock X is 0.50, and the standard deviation of Stock Y is 0.50. Which of the following comes closest to the correlation coefficient between Stock X and Stock Y? O a. 0.40 b. 0.60 c. 0.00 O d. 0.50 o e. 1.00
The options for the fill in question are equal to/greater
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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...
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