The variance of a portfolio comprised of many securities is primarily dependent upon the: A) variances...
The variance of a portfolio comprised of many securities is primarily dependent upon the:
A) variances of the securities held within the portfolio.
B) beta of the portfolio.
C) portfolio's correlation with the market.
D) covariance between the overall portfolio and the market.
E) covariances between the individual securities.
Homework Answers
Covariances between the individual securities.
the above is answer..
because Covariances creates combined risk or variance in the portfolio
Add Answer to:
The variance of a portfolio comprised of many securities is
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Problem 1: What is the variance of a portfolio with: w1 =0.2, w2
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and σ12 =5.
Problem 2: a) If the stocks 1 and 2 have negative correlation
12 then their covariance σ12 is
also negative. Yes, no, uncertain. Explain. b) If stocks 1 and 2
are uncorrelated, i.e.
12=0 then their covariance is zero, Yes, no,
uncertain. Explain c) If stocks 1 and 2 have variance
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What happens to portfolio variance when a. the correlation between securities decrease? b. the number of...
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A portfolio is comprised of equal weights of two stocks labeled Stock X and Stock Y....
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A portfolio is comprised of two stocks, A and B. Stock A has a standard deviation...
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A portfolio is composed of 80% stock and 20% bonds. The variance of stock is 170...
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2. 3: Risk and Rates of Return: Risk in Portfolio Context Risk and Rates of Return:...
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and Rates of Return: Risk in Portfolio Context The capital asset
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required rate of return is the risk-free rate of return plus a risk
premium that reflects only the risk remaining diversification. Most
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Problem 1: What is the variance of a portfolio with: w1 =0.2, w2
=0.8, σ12 =10, σ22 =20,
and σ12 =5.
Problem 2: a) If the stocks 1 and 2 have negative correlation
12 then their covariance σ12 is
also negative. Yes, no, uncertain. Explain. b) If stocks 1 and 2
are uncorrelated, i.e.
12=0 then their covariance is zero, Yes, no,
uncertain. Explain c) If stocks 1 and 2 have variance
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What happens to portfolio variance when a. the correlation between securities decrease? b. the number of assets in the portfolio increases? (Assume correlation among assets are not perfect)
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2. 3: Risk and Rates of Return: Risk in Portfolio Context Risk
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pricing model (CAPM) explains how risk should be considered when
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required rate of return is the risk-free rate of return plus a risk
premium that reflects only the risk remaining diversification. Most
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