Homework Answers
Answer 4.
When required rate of return decreases, market price of the investment increases.
Suppose, Dividend per share is $2. Required rate of return is 10%, then value of investment shall be 2/10% = $20.
If required rate of return decreases to 5%, then the value of investment shall be 2/5% = $40. Value of investment shall not decrease.
Statement is FALSE. Answer FALSE.
Answer 5.
Benefit of diversification is that, total risk of all securities composed in portfolio is reduced because of correlation between them. But it can never eliminate risk in total. Risk is reduced, but risk is not eliminated.
So, Statement is FALSE, Answer FALSE.
Answer 6
Total Risk of security is denoted by standard deviation.
Risk is divided into two types, Systematic risk and unsystematic risk. Systematic risk is risk in relation to market, which can be eliminated by proper diversification. But Unsystematic risk is risk that relates to particular security. It will always be attached to security. it cannot be eliminated fully.
So, Total risk is sum of two risks, systematic (Market) risk and unsystematic(firm) Systematic risk.
So, Answer is TRUE.
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questions 4-6
D Question 4 2.08 pts As the required rate of return of an investment...
The goal of diversification is to eliminate: Question 8 5 pts The goal of diversification is...
The goal of diversification is
to eliminate:
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please answer both questions
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The scroll down options are 1. systematic/unsystematic risk 2. systematic/unsystematic risk 3. standard deviation/risk aversion 4....
The scroll down options are
1. systematic/unsystematic risk
2. systematic/unsystematic risk
3. standard deviation/risk aversion
4. correlation coefficient/diversification
Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk- free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability...
The goal of diversification is
to eliminate:
Question 8 5 pts The goal of diversification is to eliminate: all investment risk the effects of beta. unsystematic risk. systematic risk. the market risk premium.
Question 4 1 pts Which of the following statement is correct about systematic risk and non-systematic risk? Financial markets reward you for bearing systematic risk. A stock's systematic risk is measured by the standard deviation of its return. Systematic risk can be eliminated by proper diversification. Fluctuation in oil price is a non-systematic risk. Previous Next
Question 6 1 pts The multiplication of two variables is used as a predictor if the two variables jointly affect the response. O True O False Question 7 1 pts Even if the P-value of the Ftest in a multiple regression model is nearly zero, it is possible that the R2 of the model is much less than one. O True False Question 8 1 pts In selecting independent variables for a regression model, neither the forward selection method nor...
Question 28 2.5 pts The relationship between an investment opportunity's risk and potential rate of return is inverse (i.e., fluctuates in opposite directions). True . False
please answer both questions
→ X CIO Question 4 3 pts Nonintegrated producers expense 70% at time zero and amortize the remaining 30% over 60 months. True False Question 5 4 pts The possibility that an investment project will not meet our minimum return requirements for acceptability is: a) Project depreciable life. b) Project equity. c) Project risk. d) None of the above. c) Project risk. False Question 6 3 pts
Question 6 1 pts Since unrelated diversification has to rely on financial economies of scope for its justification, we can conclude that unrelated diversification is rarely an important strategy True False Question 7 1 pts Strategic alliances are preferred to solo ventures in facilitating market entry when the value of market entry is Low Moderate Well-understood Uncertain
12.5% O 15.8% 17.2% Question 4 The expected returns for Stocks A, B, C, D, and E are 7 percent, 10 percent, 12 percent, 25 percent, and 18 percent, respectively. The corresponding standard deviations for these stocks are 12 percent, 18 percent, 15 percent, 23 percent, and 15 percent, respectively. Which one of the securities should a risk-averse investor purchase if the investment will be held in isolation (by itself? ОА Ов oc OD 5 pts Question 5 The market...
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The scroll down options are
1. systematic/unsystematic risk
2. systematic/unsystematic risk
3. standard deviation/risk aversion
4. correlation coefficient/diversification
Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk- free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability...
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