Which one of the following measures the amount of systematic risk present in a particular risky asset relative to that in an average risky asset?
1) Standard deviation
2) Squared deviation
3) Beta coefficient
4) Mean
5) Variance
Homework Answers
Beta coefficient is a measure of an investment's systematic risk while the standard deviation is a measure of an investment's total risk.
So systematic risk is defined by Beta of the Security
Option 3 is correct.
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Which one of the following measures the amount of systematic risk present in a particular risky asset relative to that in an average risky asset?
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Suppose there are two assets, one is risk-free and one is risky. The risk-free asset has a sure rate of return rj, the risky asset has a random rate of return r. Suppose the utility function of an investor is U(x) =--. The initial wealth is wo, the dollar amount invested in the risky asset is θ. r is normally distributed with mean μ and variance σ2. Based on the maximum utility framework, find the optimal investment strategy 6. (25...
2. Consider a market with only two risky stocks, A and B, and one risk-free asset. We have the following information about the stocks. Stock A Stock B Number of shares in the market 600 400 Price per share $2.00 $2.50 Expected rate of return 20% Standard dev.of return 12% Furthermore, the correlation coefficient between the returns of stocks A and B is PABWe assume that the returns are annual, and that the assumptions of CAPM hold. (a) (4 points)...
and why? Thanks!
5.2 Risk and Risk Premiums Which portfolio is more risky? Spreadsheet 5.1 2 Scenario analysis for the stock market Column 8 x Deviation from Column B x Squared Deviation 110.45 110.25 6.40 120.00 347.10 8.63 Probability HPR()Column C Mean Return 3 Scenario 4 1. Severe recession 005 5 2. Mild recession -47.00 21.00 4.00 .37 3 Normal growth 7 4 Boom 8 Column sums: 14 30 Expected return 0.25 0 40 0 30 1.85 2.75 5.60 9.0020.00...
A stock's contribution to the market risk of a well-diversified portfolio is called the Capital Asset Pricing Model (CAPM), this risk can be measured by a metric called the beta coefficient, which calculates the degree to which a stock moves with the movements in the market. risk. According to Based on your understanding of the beta coefficient, indicate whether each statement in the following table is true or false: Statement True False Beta measures the volatility in stock movements relative...
A stock's contribution to the market risk of a well-diversified portfolo is called risk. According to the Capital Asset Pricing Model (CAPM), this risk can be measured by a metric called the beta coefficient, whih degree to which a stock moves with the movements in systematic the market. unsystematic Based on your understand ing of the beta coefficient, indicate whether each stakememewrevdlowing table is true or false: Statement True False A stock that is more volatile than the market will...
B. MICFUELUNUML U C. idiosyncratic risk CD. systematic risk 0.5. Which of thes A. II,IV B. II,IV.v C. 1,111,1V ck A and Z have a correlation 05 D. 1,111, E. I, 3 Stock A and Stock B have a correlation Correlation-0.7, Stock A and Z have than a portfolio of story are an in is part of market A. Stock A and Z have a stronge CB. A portfolio of stock A and B P C C. Stock A and...
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