Question

#5 and #8 please help

de portfolio e portfolio's T useu two-fold the two-fold, then the required return should incre urn? Lastly, a porti Describe the ribe the difference between the correlation coefficient between asset's beta coefficient. coefficient between two random variables and an more concise va ortfolio il 63) Support or reject the following statement, "Diversification reduces the total risk & What is the difference between systematic and unsystematic risk? 7 Support or reject the following statement," It is better to have similar investments in a portfolio minimize risk." Explain the security market line. Show why the market portfolio's beta coefficient is 1.0. apital asset pricing model is a major pillar of modern economic theory. Explain why

Answer 1

Ans 5) Diversification reduces total risk of the portfolio not an asset, since in portfolio there are many asset and there is reduction in total risk if the assets are not perfectly correlated.

Ans 8) Security market line: it is mainly a graphical representation of capital asset pricing model. It displays the expected rate of return of individual security as a function of systematic risk. At x axis beta is there and at y axis expected return is there.