Which statement is TRUE? a) All of these statements are false b) The measure of risk...
Which statement is TRUE?
a) All of these statements are false
b) The measure of risk for a security held in a diversified portfolio is standard deviation
c) As more stocks are added to a portfolio, total risk is expected to fall but at an increasing rate. So if one were to invest in enough stocks, total risk could be eliminated.
d) Diversification reduces the portfolio’s expected return because it reduces the portfolio’s total risk
e) Proper diversification can reduce or eliminate systematic risk
Homework Answers
Pt A All of these statement is False
In case of diversified portfolio Beta is used to measure the risk. So point B is wrong,
As more stocks are added to portfolio then only unsystematic risk is reduced not total risk. So point c is wrong.
Diversification reduced unsystematic risk not expected return.Expected return depend on the return of each security in the portfolio. So point d is wrong.
Proper diversification reduced or eliminate unsystematic risk only so point e is not correct.
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Which statement is TRUE?
a) All of these statements are false
b) The measure of risk...
2. 3: Risk and Rates of Return: Risk in Portfolio Context Risk and Rates of Return:...
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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
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od The capital asset pricing model (CAPM) explains how risk should be considered when stocks and...
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QUESTION 18 Which of the following statements is CORRECT? 1. An investor can eliminate virtually all...
QUESTION 18
Which of the following statements is CORRECT?
1.
An investor can eliminate virtually all diversifiable risk if
he or she holds a very large, well-diversified portfolio of
stocks.
2.
Once a portfolio has about 40 stocks, adding additional stocks
will not reduce its risk by even a small amount.
3.
It is impossible to have a situation where the market risk of
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4.
An...
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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...
od The capital asset pricing model (CAPM) explains how risk should be considered when stocks and other assets are held -Select- The CAPM states that any stock's required rate of return is -Select the risk-free rate of return plus a risk premium that reflects only the risk remaining -Select- diversification. Most individuals hold stocks in portfolios. The risk of a stock held in a portfolio is typically -Select the stock's risk when it is held alone. Therefore, the risk and...
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QUESTION 18
Which of the following statements is CORRECT?
1.
An investor can eliminate virtually all diversifiable risk if
he or she holds a very large, well-diversified portfolio of
stocks.
2.
Once a portfolio has about 40 stocks, adding additional stocks
will not reduce its risk by even a small amount.
3.
It is impossible to have a situation where the market risk of
a single stock is less than that of a portfolio that includes the
stock.
4.
An...
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