Risk-free investments have rates of return: A. that exhibit a large spread of potential payoffs. B....
Risk-free investments have rates of return:
A. that exhibit a large spread of potential payoffs.
B. that are uncertain, but have a certain time horizon.
C. with a standard deviation equal to zero.
D. equal to zero.
Homework Answers
Risk-free investments have rates of return with a standard deviation equal to zero. Hence,option(C) is correct.
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Risk-free investments have rates of return:
A. that exhibit a large spread of potential payoffs.
B....
Consider the following two investments. One is a risk-free investment with a $100 return. The oth...
Consider the following two investments. One is a risk-free investment with a $100 return. The other investment pays $2,000 20% of the time and a $375 loss the rest of the time. Based on this information, answer the following: (i) Compute the expected returns and standard deviations on these two investments individually. (ii) Compute the value at risk for each investment. (iii) Which investment will risk-averse investors prefer, if either? Which investment will risk- neutral investors prefer, if either?
Theoretically, a risk-free portfolio could be created by combining risky securities in a manner that caused...
Theoretically, a risk-free portfolio could be created by combining risky securities in a manner that caused the: Select one: a. Nondiversifiable risk to be eliminated. b. Portfolio beta to equal zero. O c. Expected return of the portfolio to equal the market expected return. d. Risk premium to equal one. e. Portfolio standard deviation to equal one.
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...
6. Assume the CAPM with risk-free lend- ing but no risk-free borrowing. Suppose the return on...
6. Assume the CAPM with risk-free lend- ing but no risk-free borrowing. Suppose the return on the market portfolio is 9 percent, and the return on a zero beta folio is 5 percent. You have combined two assets in a portfolio with equal weights. The expected returns on the two assets are 7 percent and 15 percent. What is the beta of this portfolio? port- (а). О.50 (b). 0.67 (с). 1.50 (d). 2.75
The risk-free rate of return Select one: a. is made up of the time preference rate...
The risk-free rate of return Select one: a. is made up of the time preference rate and the expected inflation rate. b. is determined by the central bank. c. is higher for the shareholders than for the bondholders. O d. is equal to zero.
The risk-free rate is 5%. A risky portfolio has an expected return of 10% and a...
The risk-free rate is 5%. A risky portfolio has an expected return of 10% and a standard deviation of return of 20%. If you want to form a complete portfolio from these two assets, and you want this portfolio to have an expected return greater than 5% but less than 10% what must you do? Assume that all borrowing and lending can be done at the risk-free rate. a. Lend at the risk free rate b. borrow at the risk...
If risk-free investments are currently 6% and our expected return from Stock V was 14%. What...
If risk-free investments are currently 6% and our expected return from Stock V was 14%. What is the risk premium on this investment? Multiple Choice A. 8% B. 10% C. 6% D. 2% E. 4%
Given that the risk-free rate is 5%, the expected return on the market portfolio is 20%,...
Given that the risk-free rate is 5%, the expected return on the market portfolio is 20%, and the standard deviation of returns to the market portfolio is 20%, answer the following questions: c. Now suppose that you want to have a portfolio, which pays 25% expected return. What is the weight in the risk free asset and in the market portfolio? d. What do these weights mean: What are you doing with the risk free asset and what are you...
Which Company would have the highest bond spread (premium over the risk free rate)? A. AAA...
Which Company would have the highest bond spread (premium over the risk free rate)? A. AAA corporation B. B corporation C. BB corporation D. BBB corporation
ve 3.24 The risk-free ering the following investments. free rate is currently 3%, and the market...
ve 3.24 The risk-free ering the following investments. free rate is currently 3%, and the market return is 10%. Assume you are consid- Beta Investment 1.5 1.0 0.75 0.0 b. Use the capital asset pricing a. Which investment is most risky? Least risky? b. Use the capital asset pricing model to find the required return on each of the investments. c. Using your findings in part b, draw the security market line. d. On the basis of your findings in...
Theoretically, a risk-free portfolio could be created by combining risky securities in a manner that caused the: Select one: a. Nondiversifiable risk to be eliminated. b. Portfolio beta to equal zero. O c. Expected return of the portfolio to equal the market expected return. d. Risk premium to equal one. e. Portfolio standard deviation to equal one.
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...
6. Assume the CAPM with risk-free lend- ing but no risk-free borrowing. Suppose the return on the market portfolio is 9 percent, and the return on a zero beta folio is 5 percent. You have combined two assets in a portfolio with equal weights. The expected returns on the two assets are 7 percent and 15 percent. What is the beta of this portfolio? port- (а). О.50 (b). 0.67 (с). 1.50 (d). 2.75
The risk-free rate of return Select one: a. is made up of the time preference rate and the expected inflation rate. b. is determined by the central bank. c. is higher for the shareholders than for the bondholders. O d. is equal to zero.
ve 3.24 The risk-free ering the following investments. free rate is currently 3%, and the market return is 10%. Assume you are consid- Beta Investment 1.5 1.0 0.75 0.0 b. Use the capital asset pricing a. Which investment is most risky? Least risky? b. Use the capital asset pricing model to find the required return on each of the investments. c. Using your findings in part b, draw the security market line. d. On the basis of your findings in...
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