HomeworkClass3

2 i.Discuss the importance of using benchmarks in evaluating portfolio performance                              ii. Explain the concept of risk tolerance and how it differs from risk appetite                      iii. Describe the difference between inherent risk and residual risk in investing                                                      iv. Explain how the APT differs from the CAPM in terms of underlying assumptions and factors considered          v. Explain the role of diversification in CAPM

1.What is the relationship between an investment’s risk and its return? Please provide examples if possible. 2. Difference between Institutional Investors and Individual Investors.

Biases and attitudes of investors and their anomalous behaviors inconsistent with traditional finance theories are studied according to: Group of answer choices C. Modigliani & Miller A. Random Walk Theory D. Modern Portfolio Theory B. Behavioral Finance

Portfolio theory tends to define risky investments in terms of just two factors: expectedreturns and variance (or standard deviation) of those expected returns. What assumptions need to be made about investors and the expected investment returns (one assumption in each case) to justify this ‘two-factor’ approach? Are these assumptions justified in real life?

Portfolio theory as described by Markowitz is most concerned with:a. The elimination of systematic risk.b. The effect of diversification on portfolio risk.c. The identification of unsystematic risk.d. Active portfolio management to enhance return.

When can investors treat beta as a relevant risk measure and when can they treat beta as only a systematic risk measure? Explain the two cases clearly and carefully (Explain using a graph and make sure you label the axes)

Concepts of Risk.  In broad terms, why is some risk diversifiable? Why are some risks non-diversifiable?  Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic risk?

Explain the difference between (a) stand-alone risk and (b) risk in a portfolio context. How are they measured or calculated, and are they relevant to investors?

Examine (i) the relation between market returns and investor sentiment, and (ii) the relation between market returns and conditional volatility. Discuss potential limitations of your work.

Question No. 1:                                                                                        Explain the following Financial Terminology and then determined the relationship between its. portfolio efficient Beta Coefficient frontier efficient Diversification Diversifiable Risk Systematic Risk

1. What are the two most important inputs one needs in order to model default risk within their portfolios

a. Briefly explain the concept of the efficient market hypothesis (EMH) and each of its three forms—weak, semistrong, and strong—and briefly discuss the degree to which existing empirical evidence supports each of the three forms of the EMH.b. Briefly discuss the implications of the efficient market hypothesis for investment policy as it applies to:i. Technical analysis in the form of charting.ii. Fundamental analysis.c. Briefly explain the roles or responsibilities of portfolio managers in an efficient market environment.

please help me check my work and anything unsolved, thanks

Which of the following statements regarding non-systematic risk, systematic risk and total risk is/are true? Select one or more:a. As the number of assets within a portfolio increases, the total risk of a portfolio will go to zero.b. A riskfree asset must have zero non-systematic risk.c. A well diversified portfolio must have zero systematic riskd. Under the Capital Asset Pricing Model (CAPM).an asset with zero systematic risk must have expected return equal to the riskfree rate.

Please step by step solutions

In a seminal article on portfolio theory, Markowitz (1952) illustrated that investors are not compensated for taking on firm specific or idiosyncratic risk; however, they are compensated for taking market or systemic risk. Use your understanding of the Capital Asset Pricing Model (CAPM), statistical concepts such as standard deviation and variance, and our ideas about market efficiency and indicate whether you believe that this is a good theory. Include at least two citations that support your response.

All parts areunder one question and therefore can be answered.  7. Portfolio expected return and risk A collection of financial assets and securities is referred to as a portfolio. Most individuals and institutions invest in a portfolio, making portfolio risk analysis an integral part of the field of finance. Just like stand-alone assets and securities, portfolios are also exposed to risk. Portfolio risk refers to the possibility that an investment portfolio will not generate the investor’s expected rate of return.   Analyzing portfolio risk and return involves the understanding of expected returns from a portfolio. Consider the following case:   Andre is an amateur investor who holds a small portfolio consisting of only four stocks. The stock holdings in his portfolio are shown in the following table:   Stock Percentage of Portfolio Expected Return Standard Deviation Artemis Inc. 20% 6.00% 25.00% Babish & Co. 30% 14.00% 29.00% Cornell Industries 35% 11.00%…

When describing the attitude of investors towrds risk, which statement is correct? A.Investors may behave as though they are risk seekers for small investments B.For a risk-averse investor, the standard deviation of the return distribution is a relevant measure of risk C.Investors behave as though they are risk averse for investments of significant size D.All of the above

Which one of the following is the formula that explains the relationship between the expected returnon a security and the level of that security's systematic risk?Select one:a. Time value of money equationb. Unsystematic risk equationc. Expected risk formulad. Market performance equatione. Capital asset pricing model

Give typing answer with explanation and conclusion  The additional compensation that investors require to take on higher risk investments is the a. standard deviation. b. coefficient variation. c. Sharpe ratio. d. risk premium. e. risk aversion.

Which of the following decision criteria is the easiest to use and very popular among investors? O Payback period. O Internal rate of return. O Average accounting return. Net present value. O Discounted return on investment.