The main reason for diversification for an investor is to: Multiple Choice take advantage of the...
The main reason for diversification for an investor is to:
Multiple Choice
-
take advantage of the fact that returns of assets are perfectly positively correlated.
-
take advantage of the fact that returns on assets are not perfectly correlated.
-
lower transaction costs.
-
gain from the greater returns that come from greater risk.
Homework Answers
The main reason for diversification for an investor is to take the advantage of the facts that return on assets are not perfectly correlated. IF the return were correlated then we can invest in the same portfolio and doesn't need to diversify it.
The answer is "B".
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The main reason for diversification for an investor is to:
Multiple Choice
take advantage of the...
The main focus of sensitivity analysis is to: Multiple Choice investigate how changing multiple variables will...
The main focus of sensitivity analysis is to: Multiple Choice investigate how changing multiple variables will change the Internal Rate of Return. determine the one variable that has the highest level of risk. find the break-even sales amount which reduces risk. determine the variables that can be excluded from any further analysis. identify the correct amount of variable and fixed costs.
98) Which of the following statements is FALSE A) The volatility declines as the number of stocks in a portfolio grows. B) An equally weighted portfolio is a porfolio in which the same amount is...
98) Which of the following statements is FALSE A) The volatility declines as the number of stocks in a portfolio grows. B) An equally weighted portfolio is a porfolio in which the same amount is invested in eadh stock C) As the number of stocks in a portfolio grows large, the variance of the portfolio is determined primarily by the average covariance among the stocks D) When combining stocks into a portfolio that puts positive weight on each stock, unless...
which of the following statements is true of insider trading? Surved Help Save & Multiple Choice...
which of the following statements is true of insider trading?
Surved Help Save & Multiple Choice Insider trading holds back information from financial markets that moves stock prices closer to the point that reflects their true value. Insiders as well as outsiders can lay legitimate claims on gains from stock sales that take advantage of others. Allowing insider trading deters the employees of a firm from working for the benefit the firm When an insider-trading stock transaction leads to one...
PVIDED BEO0 PART B: MULTIPLE CHOICE. USE THE ANSWER SHEET 1. Consider an investor who welcomes...
PVIDED BEO0 PART B: MULTIPLE CHOICE. USE THE ANSWER SHEET 1. Consider an investor who welcomes above-average portfolio risk. Which of the following statements (a) The investor is likely to be comfortable investing in a portfolio that consists of few stocks (b) The investor does not seek a high level of portfolio diversification. (c) The investor actively seeks to reduce the potential volatility of a portfolio. (d) The investor does not seek to add a negative-beta stock to a portfolio....
Use the following facts for Multiple Choice problems 38 and 39: Assume on January 1, 2019,...
Use the following facts for Multiple Choice problems 38 and 39: Assume on January 1, 2019, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2019, prepared immediately before this transaction. Book Values Investor Investee Receivables & inventories Land.. Property & equipment, net Total assets. $ 100,000 200,000 225,000 $ 525,000 $ 50.000 +10 80,000 - 5...
MULTIPLE CHOICE 1) Which of the following is NOT an investment as defined in the text?...
MULTIPLE CHOICE 1) Which of the following is NOT an investment as defined in the text? A) a certificate of deposit issued by a bank B) a new automobile C) a United States Saving Bond D) a mutual fund held in a retirement account 2) Which of the following is NOT traded in the securities markets? A) stocks B) bonds C) derivatives D) real estate 3) The governmental agency that oversees the capital markets is the A) Federal Trade Commission....
Loans made between borrowers and lenders are 1 Multiple Choice 84 nts liabilities to the lenders...
Loans made between borrowers and lenders are 1 Multiple Choice 84 nts liabilities to the lenders and assets to the borrowers since the borrower obtains the funds. assets to the lenders and liabilities of the borrowers since the promises are made to the lenders. not part of either parties' assets or liabilities until the loans are repaid liabilities to both the lenders and the borrowers. Financial intermediaries 2 Multiple Choice 2.94 points O can be banks, but not all financial...
Use the following facts for Multiple Choice problems 24 through 27 (each question is independent of...
Use the following facts for Multiple Choice problems 24 through 27 (each question is independent of MULTIPLE CHOICE Assignments with the logo in the margin are available in our See the Preface of the book for details. The others) Assume on January 1, 2019 an investor company paid $1,980 to an investee company in exchange for the following assets and liabilities transferred from the investe company Asset (Liability) Production equipment.. Factory Licenses LO d. Estimated Fair Value $500 800 700...
pehormance within of an index of share returns for a particular country or industry sector a...
pehormance within of an index of share returns for a particular country or industry sector a corporation rather than purchased. 9. Commercial paper is a short-term security issued by A. the Federal Reserve Bank D. the New York Stock Exchange 10. Theindex represents the performance of the Canadian stock market. A. DAX 11. Shelf registration A. is a way of placing issues in the primary market. B. allows firms to register securities for sale over a two-year period. C. increases...
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
a single stock is less than that of a portfolio that includes the
stock.
4.
An...
98) Which of the following statements is FALSE A) The volatility declines as the number of stocks in a portfolio grows. B) An equally weighted portfolio is a porfolio in which the same amount is invested in eadh stock C) As the number of stocks in a portfolio grows large, the variance of the portfolio is determined primarily by the average covariance among the stocks D) When combining stocks into a portfolio that puts positive weight on each stock, unless...
which of the following statements is true of insider trading?
Surved Help Save & Multiple Choice Insider trading holds back information from financial markets that moves stock prices closer to the point that reflects their true value. Insiders as well as outsiders can lay legitimate claims on gains from stock sales that take advantage of others. Allowing insider trading deters the employees of a firm from working for the benefit the firm When an insider-trading stock transaction leads to one...
PVIDED BEO0 PART B: MULTIPLE CHOICE. USE THE ANSWER SHEET 1. Consider an investor who welcomes above-average portfolio risk. Which of the following statements (a) The investor is likely to be comfortable investing in a portfolio that consists of few stocks (b) The investor does not seek a high level of portfolio diversification. (c) The investor actively seeks to reduce the potential volatility of a portfolio. (d) The investor does not seek to add a negative-beta stock to a portfolio....
Use the following facts for Multiple Choice problems 38 and 39: Assume on January 1, 2019, an investor company acquired 100% of the outstanding voting common stock of an investee company. The following financial statement information is for the investor company and the investee company on January 1, 2019, prepared immediately before this transaction. Book Values Investor Investee Receivables & inventories Land.. Property & equipment, net Total assets. $ 100,000 200,000 225,000 $ 525,000 $ 50.000 +10 80,000 - 5...
Loans made between borrowers and lenders are 1 Multiple Choice 84 nts liabilities to the lenders and assets to the borrowers since the borrower obtains the funds. assets to the lenders and liabilities of the borrowers since the promises are made to the lenders. not part of either parties' assets or liabilities until the loans are repaid liabilities to both the lenders and the borrowers. Financial intermediaries 2 Multiple Choice 2.94 points O can be banks, but not all financial...
Use the following facts for Multiple Choice problems 24 through 27 (each question is independent of MULTIPLE CHOICE Assignments with the logo in the margin are available in our See the Preface of the book for details. The others) Assume on January 1, 2019 an investor company paid $1,980 to an investee company in exchange for the following assets and liabilities transferred from the investe company Asset (Liability) Production equipment.. Factory Licenses LO d. Estimated Fair Value $500 800 700...
pehormance within of an index of share returns for a particular country or industry sector a corporation rather than purchased. 9. Commercial paper is a short-term security issued by A. the Federal Reserve Bank D. the New York Stock Exchange 10. Theindex represents the performance of the Canadian stock market. A. DAX 11. Shelf registration A. is a way of placing issues in the primary market. B. allows firms to register securities for sale over a two-year period. C. increases...
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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