Homework Answers
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correct answer is option : Perfectly negatively correlated.
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If you want to form a two-stock portfolio to diversify some of the risk, you should...
When combining stocks in a portfolio, the greatest reduction in overall risk of the portfolio will...
When combining stocks in a portfolio, the greatest reduction in overall risk of the portfolio will occur when: (choose only one answer) Group of answer choices A - the two stocks are negatively correlated. B - the two stocks are positively correlated. C - the two stocks are uncorrelated.
2. (25 pts) Suppose you find two stocks in the market that they are perfectly negatively...
2. (25 pts) Suppose you find two stocks in the market that they are perfectly negatively correlated (p. They have the following characteristics: Mean E(r) Stock x0.10 Stock y 0.16 St.Dev, σ 0.05 0.105 (a) (10 pts) If you want to form a portfolio by only the above stocks, what would be the proportion (weight) of your money invested in each stock so you can achieve the lowest possible risk (minimum variance portfolio)? (b) (10 pts) What is the expected...
Q15. Portfolio Choice (5 Points) In a two-assets allocation problem, what's the portfolio volatility if the...
Q15. Portfolio Choice (5 Points) In a two-assets allocation problem, what's the portfolio volatility if the return correlation between asset 1 and asset 2 is -1 (perfectly negatively correlated), 0 or 1 (perfectly positively correlated)? Q16. Describe some of the ways the CAPM is applied in practice (5 Points)
You are considering investing in two stocks to form a portfolio. You are very risk averse...
You are considering investing in two stocks to form a portfolio. You are very risk averse (you do not like risk). Which one of the following stock combinations will you choose for your portfolio (these are your only options)? Stocks A & B which have a correlation coefficient of +1.0. Stocks C & D which have correlation coefficient of -0.6. Stocks G & H which both have a beta of 2.0. Stocks E & F which have a correlation coefficient...
Assume you wish to evaluate the risk and return behaviors associated with various combinations of two stocks, Alpha Sof...
Assume you wish to evaluate the risk and return behaviors associated with various combinations of two stocks, Alpha Software and Beta Electronics, under three possible degrees of correlation: perfect positive, uncorrelated, and perfect negative. The average return and standard deviation for each stock appears here: Asset Average Return,overbar r Risk (Standard Deviation), s Alpha 5.1% 30.3% Beta 11.2% 50.5% a. If the returns of assets Alpha and Beta are perfectly positively correlated (correlation coefficient equals plus 1),...
stock boom and stock bust are perfectly negatively correlated and their standard deviation are 24.495% and...
stock boom and stock bust are perfectly negatively correlated and their standard deviation are 24.495% and 9.798% respectively. what is the approximate weight of stock boom to form a portfolio that has no volatility? a. 15% b. 20% c. 28% d. 49% e. it is not possible to form a risk-less portfolio with stocks boom and bust
2. 3: Risk and Rates of Return: Risk in Portfolio Context Risk and Rates of Return:...
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...
2. Portfolio risk and diversification A financial planner is examining the portfolios held by several of...
2. Portfolio risk and diversification A financial planner is examining the portfolios held by several of her clients. Identify which of the following portfolios is likely to have the smallest standard deviation: A portfolio with 10 randomly selected stocks from U.S. and international markets A portfolio with 10 randomly selected international stocks A portfolio with 10 randomly selected U.S. stocks Portfolio managers pick stocks for their clients' portfolios based on the investment objective of the portfolio and several other factors....
3. Portfolio risk and diversification Aa Aa E A financial planner is examining the portfolios held...
3. Portfolio risk and diversification Aa Aa E A financial planner is examining the portfolios held by several of her clients. Which of the following portfolios is likely to have the smallest standard deviation? O O O A portfolio containing only Chevron stock A portfolio consisting of about 30 energy stocks A portfolio consisting of about 30 randomly selected stocks Portfolio managers pick stocks for their clients' portfolios based on the investment objective of the portfolio and several other factors....
3. Portfolio risk and diversification Aa Aa A financial planner is examining the portfolios held by...
3. Portfolio risk and diversification Aa Aa A financial planner is examining the portfolios held by several of her clients. Which of the following portfolios is likely to have the smallest standard deviation ? A portfolio with 10 randomly selected international stocks A portfolio with 10 randomly selected U.S. stocks A portfolio with 10 randomly selected stocks from U.S. and international markets Portfolio managers pick stocks for their clients' portfolios based on the investment objective of the portfolio and several...
2. (25 pts) Suppose you find two stocks in the market that they are perfectly negatively correlated (p. They have the following characteristics: Mean E(r) Stock x0.10 Stock y 0.16 St.Dev, σ 0.05 0.105 (a) (10 pts) If you want to form a portfolio by only the above stocks, what would be the proportion (weight) of your money invested in each stock so you can achieve the lowest possible risk (minimum variance portfolio)? (b) (10 pts) What is the expected...
Q15. Portfolio Choice (5 Points) In a two-assets allocation problem, what's the portfolio volatility if the return correlation between asset 1 and asset 2 is -1 (perfectly negatively correlated), 0 or 1 (perfectly positively correlated)? Q16. Describe some of the ways the CAPM is applied in practice (5 Points)
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...
2. Portfolio risk and diversification A financial planner is examining the portfolios held by several of her clients. Identify which of the following portfolios is likely to have the smallest standard deviation: A portfolio with 10 randomly selected stocks from U.S. and international markets A portfolio with 10 randomly selected international stocks A portfolio with 10 randomly selected U.S. stocks Portfolio managers pick stocks for their clients' portfolios based on the investment objective of the portfolio and several other factors....
3. Portfolio risk and diversification Aa Aa E A financial planner is examining the portfolios held by several of her clients. Which of the following portfolios is likely to have the smallest standard deviation? O O O A portfolio containing only Chevron stock A portfolio consisting of about 30 energy stocks A portfolio consisting of about 30 randomly selected stocks Portfolio managers pick stocks for their clients' portfolios based on the investment objective of the portfolio and several other factors....
3. Portfolio risk and diversification Aa Aa A financial planner is examining the portfolios held by several of her clients. Which of the following portfolios is likely to have the smallest standard deviation ? A portfolio with 10 randomly selected international stocks A portfolio with 10 randomly selected U.S. stocks A portfolio with 10 randomly selected stocks from U.S. and international markets Portfolio managers pick stocks for their clients' portfolios based on the investment objective of the portfolio and several...
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