More can be said about risk, especially as to its nature, when we own more than one asset in our investment portfolio.” Define risk and explain how risk is affected if we diversify our investment by holding a variety of securities?
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Risk in investment terms is defined as the probability of a loss occurring or the actual return is lesser than the expected return. Risk can be diversified by holding a variety of securities. For example, those investors who have a higher risk appetite may invest in high risk stocks in anticipation of high returns. However, if the returns do not meet expectations then the investor may suffer a total loss. In this case, the investors may invest in bonds and T-Bills that are generally risk free to cover for the loss. Also, in other view if an investor is risk averse he may choose to invest more in risk free assets and invest also in stocks to have appreciation of the assets.
More can be said about risk, especially as to its nature, when we own more than...
Investors can reduce risk by holding more than one asset in a portfolio. True or false?
Holding all else equal, what can be said about a stock or portfolio of stocks with a Beta of 1.2.2 1) It has no systematic risk. 2) It is more volatile than the overall market. 0 3) It is less volatile than a typical stock in the market. 4) It tells you nothing about volatility.
Discussion Topic: When performing an audit, auditors are especially concerned about engagement risk. For this reason, they perform main activities to reduce engagement risks. Further, the auditing standards require auditors to understand the client's business, and its environments, and its internal controls when planning the audit so that they could better plan the nature, timing, and extent of the audit. Required: 1. Discuss why the auditor would be concerned about engagement risk and identify two or more activities the auditors...
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...
Dropdown options: 1-risk/return 2-equal to/greater or less than 3-self contained/stand-alone 4-variance/standard deviation 5-variance/beta coefficient 6-diversifiable/non-diversiable 7-is/ is not 8-diversifiable/non-diversifiable 9-random/non random 10-decreasing/increasing 11-2000+/500 12-reduces/increases 13-systematic of market/unsystematic or company-specific 14-diversifiable/non diversifiable 1. Basic concepts - Risk and return Professor Isadore (Izzy) Invest-a-Lot retired two years ago from Exceptional College, a small liberal arts college in North Carolina after teaching corporate finance and investment theory for 35 years. Yesterday, Izzy appear on EC LIVE, a television show produced for the students,...
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...
my qustion is Q 8, beta and capm thank you ! Chapter 13 Retum, Risk, and the Security Market Line 5. Expected Portfolio B asset, can the expect the portfolio? Can it be less yes to one or both of d. The directors of Big Widget die in a plane crash. Congress approves changes to the tax code that will increase the top marginal perte tax rate. The legislation had been debated for the previous six months. ted Portfolio Returns...
B. MICFUELUNUML U C. idiosyncratic risk CD. systematic risk 0.5. Which of thes A. II,IV B. II,IV.v C. 1,111,1V ck A and Z have a correlation 05 D. 1,111, E. I, 3 Stock A and Stock B have a correlation Correlation-0.7, Stock A and Z have than a portfolio of story are an in is part of market A. Stock A and Z have a stronge CB. A portfolio of stock A and B P C C. Stock A and...
“In my opinion, we ought to stop making our own drums and accept that outside supplier’s offer,” said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $19 per drum, we would be paying $5.35 less than it costs us to manufacture the drums in our own plant. Since we use 60,000 drums a year, that would be an annual cost savings of $321,000.” Antilles Refining’s current cost to manufacture one drum is given below...
For this question, i have trouble doing the first one. Can you please explain how can i get the RATE OF RETURN FOR RF? Thanks X Yand Zare portfolios of securities. Data pertaining to these portfolios and the market portfolio are given in the following table: Std dev(R 0.28 Cov(Ri Rm Portfolio E(RD Beta P p.m X 0.015 Y 0.23 ? 0.17 1.5 0.92 0.048 0.34 ? M ? 0.10 2 0.02 Also Cov(Rs.Ry= 0.04 REQUIRED risk free Calculate the...