Question

6 Which one of the lolowing types of nantbe effeively elminated through portoie O A. materials shortage C. product recalts Z Puw gt a b wth an 8% coupon rate for $1,100-d sod ater for $1.150 g peod OA. 118% 727% C. 113% OD, 13.0% 8 What is the cument price of a $1,000, % coupon bond that pays interest som-nualy ie f the bond matures in ten years and has a yold-to-narty or 7 1325%? OB. $1.000 C. $1.080 O D. $920 9 You have gathered the folowing information concerming a particular i nvestment and conditions in the market Risk-free rate 25% Market ream 110% Beta of investment 1.35 According to the Capital Asset Pricing Model, the required return for this investment A 1148 B. c. D. 885%. 1485%. 13.96% 10. Combining uncorrelated assets should O A not change the overall risk level of a portolio. OB. ncrese he overal sk livel of a portalo O C. decrease the overall risk level of a portolio D. cause the other assets in the portfolio to become positively related

Answer 1

Answer to Q#6: Option-(B): inflation risk Reason: Inflation risk is a risk which is associated with market risk and in general it is a market downturn due to increase in cost. It is one of the market risks that cannot be diversified away. The risk of investing in a single industry or sector with returns not correlated to each other. A general downturn such as inflation risk in the market, So, risks associated with material shortages, product recalls and labor problems, etc. can be effectively eleminated through portfolio diversification whereas inflation risk cannot be.