Homework Answers
Answer:
15.The diversification of a portfolio results primarily in the reduction of risk.For a domestic portfolio,the diversification of the portfolio results in a weighted average expected return,but a reduction in risk as the returns of individual securities will be less than perfectly correlated.
This principle also applies to international diversification,but the definition of the market is expanded with many new securities with their respective risk,returns and correlations being added.The other added component of international diversifications is the introduction of currency risk.
16.A diversified portfolio has a systematic risk and unsystematic risk.Systematic risk is the risk of the market itself.Unsystematic risk is the risk of individual securities within the market and the portfolio.Increasing the number of securities in the portfolio reduces and ultimately eliminates the unsystematic risk,leaving only the risk of the market,unsystematic risk.
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15. How does the diversification of a portfolio change its expected returns and expected risks? Is...
The following are the US dollar returns for three nations’ equity markets. Calculate the Sharpe and...
The following are the US dollar returns for three nations’ equity markets. Calculate the Sharpe and Treynor measures of them. Mean returns Std. dev. Risk-free rate beta Estonia 1.12% 16.00% 0.42% 1.65 Latvia 0.75 22.80 0.42 1.53 Lithuania 1.60 13.50 0.42 1.20
BU 477 HW #6: Due 11/25 Ch. 17:Q17.6, 17.9, 17.11, 17.14 #1 The following are the...
BU 477 HW #6: Due 11/25 Ch. 17:Q17.6, 17.9, 17.11, 17.14 #1 The following are the US dollar returns for three nations' equity markets. Calculate the Sharpe and Treynor measures of them. Mean returns Std. dev. Risk-free rate beta Estonia 1.12% 16.00% 0.42% 1.65 Latvia 0.75 22.80 0.42 1.53 Lithuania 1.60 13.50 0.42 1.20
doud 22. Excess return portfolio performance measures Adjust portfolio risk to match benchmark risk. Compare portfolio...
doud 22. Excess return portfolio performance measures Adjust portfolio risk to match benchmark risk. Compare portfolio returns to expected returns under CAPM. Evaluate portfolio performance on the basis of return per unit of risk. Indicate historic average differential return per unit of historic variability of differential return. None of the above. 23 An example of a market cap weighted stock market indicator series is the a. Dow Jones Industrial Average. b. Nikkei Dow Jones Average. c. S&P 500 Index. d....
Based on current dividend yields and expected capital gains, the expected rate of returns on portfolio...
Based on current dividend yields and expected capital gains, the expected rate of returns on portfolio A and B are 10% and 11% respectively. The beta of portfolio A is 0.80 while that of B is 1.4. risk-free rate is 6%, while expected return of the market portfolio is 10%. The standard deviation of portfolio A is 25% , while that of B is 22%, and that of the stock market index is 20%. (a) If you currently hold a...
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...
od The capital asset pricing model (CAPM) explains how risk should be considered when stocks and...
od The capital asset pricing model (CAPM) explains how risk should be considered when stocks and other assets are held -Select- The CAPM states that any stock's required rate of return is -Select the risk-free rate of return plus a risk premium that reflects only the risk remaining -Select- diversification. Most individuals hold stocks in portfolios. The risk of a stock held in a portfolio is typically -Select the stock's risk when it is held alone. Therefore, the risk and...
Does random diversification increase or decrease the variance of a portfolio? What role do events play...
Does random diversification increase or decrease the variance of a portfolio? What role do events play in the actual return of a portfolio? Is this statement true – “if the event is expected, it is already reflected in the stock price”? Explain. What risk can be diversified away? Beta measures what form of risk? If you have a three stock portfolio and all three stock have betas of 2.0 or more what is the beta of the portfolio? Less than...
29) Which of the following statements is FALSE? A) The Sharpe ratio of the portfolio tells us how much our expected...
29) Which of the following statements is FALSE? A) The Sharpe ratio of the portfolio tells us how much our expected retun will increase for a given increase in volatility B) We should continue to trade securities until the expected r return of each security equals its required return. Q) The required return is the expected return that is necessary to compensate for the risk that an investment will contribute to the portfolio. D) If security is required retun exceeds...
Ch 02: Assignment - Risk and Return: Part 1 Term Answer Risk A Expected rate of...
Ch 02: Assignment - Risk and Return: Part 1 Term Answer Risk A Expected rate of return B Description The rate of return expected to be realized from an investment, calculated as the mean of the probability distribution of its possible returns. The term applied to the risk of an asset that is measured by the standard deviation of the asset's expected returns. The possibility that an actual outcome will be better or worse than its expected outcome The general...
Kelli Blakely is a portfolio manager for the Miranda Fund (Miranda), a core large-cap equity fund....
Kelli Blakely is a portfolio manager for the Miranda Fund (Miranda), a core large-cap equity fund. The market proxy and benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. Her portfolio holds only stocks found in the S&P 500 and cash. Blakely was able to produce exceptional returns last year (as outlined in...
BU 477 HW #6: Due 11/25 Ch. 17:Q17.6, 17.9, 17.11, 17.14 #1 The following are the US dollar returns for three nations' equity markets. Calculate the Sharpe and Treynor measures of them. Mean returns Std. dev. Risk-free rate beta Estonia 1.12% 16.00% 0.42% 1.65 Latvia 0.75 22.80 0.42 1.53 Lithuania 1.60 13.50 0.42 1.20
doud 22. Excess return portfolio performance measures Adjust portfolio risk to match benchmark risk. Compare portfolio returns to expected returns under CAPM. Evaluate portfolio performance on the basis of return per unit of risk. Indicate historic average differential return per unit of historic variability of differential return. None of the above. 23 An example of a market cap weighted stock market indicator series is the a. Dow Jones Industrial Average. b. Nikkei Dow Jones Average. c. S&P 500 Index. d....
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...
od The capital asset pricing model (CAPM) explains how risk should be considered when stocks and other assets are held -Select- The CAPM states that any stock's required rate of return is -Select the risk-free rate of return plus a risk premium that reflects only the risk remaining -Select- diversification. Most individuals hold stocks in portfolios. The risk of a stock held in a portfolio is typically -Select the stock's risk when it is held alone. Therefore, the risk and...
29) Which of the following statements is FALSE? A) The Sharpe ratio of the portfolio tells us how much our expected retun will increase for a given increase in volatility B) We should continue to trade securities until the expected r return of each security equals its required return. Q) The required return is the expected return that is necessary to compensate for the risk that an investment will contribute to the portfolio. D) If security is required retun exceeds...
Ch 02: Assignment - Risk and Return: Part 1 Term Answer Risk A Expected rate of return B Description The rate of return expected to be realized from an investment, calculated as the mean of the probability distribution of its possible returns. The term applied to the risk of an asset that is measured by the standard deviation of the asset's expected returns. The possibility that an actual outcome will be better or worse than its expected outcome The general...
Kelli Blakely is a portfolio manager for the Miranda Fund (Miranda), a core large-cap equity fund. The market proxy and benchmark for performance measurement purposes is the S&P 500. Although the Miranda portfolio generally mirrors the asset class and sector weightings of the S&P, Blakely is allowed a significant amount of leeway in managing the fund. Her portfolio holds only stocks found in the S&P 500 and cash. Blakely was able to produce exceptional returns last year (as outlined in...
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