Adding alternative investments to a traditional portfolio can increase expected returns and reduce systematic risk.
Q: hich of the following would not be acceptable as a measure of basic investment risk? a)Expected…
A: Risk is always there when you invest in stock returns and risk is volatility of returns and change…
Q: Optimal portfolios can be obtained without diversification. True or false?
A: optimal portfolio are the one that minimises the risk for given level of return.
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Q: correlation
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Q: How do an investment's required rate of return vary with perceived risk? Explain with an example?
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Q: What is the expected return on a portfolio? How can the expected return on a portfolio be…
A: Expected Return on Portfolio =( Weights of Stock 1 * Return of Stock 1) + ( Weights of Stock 2 *…
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A: In this question, we are required to fill the given blanks.
Q: What is the expected return on a portfolio? How can the expected return on a portfolio be…
A:
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A: Forward hedge hedge and money market hedge are two different methods of hedging.
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Q: The CAPM states that expected returns depend on an asset’s loading on market risk.
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Q: Compare and contrast systematic and unsystematic risk and how it affects a portfolio.
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Q: When a portfolio is diversified, what type of risk is reduced? Multiple Choice…
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A: Modern portfolio theory assumes that every investor wants to achieve the highest possible long-term…
Adding alternative investments to a traditional portfolio can increase expected returns and reduce systematic risk.
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- The CAPM implies that heterogeneous agents hold the same risky portfolio a) even if they differ in their risk aversion b) even if they face constraints on leveraging. Explain whether it is TRUE, FALSE or UNCERTAIN.What does Jensen's alpha measure? a. An investor's reward in proportion to their assumption of systematic risk b. The abnormal return of an asset, defined as the degree to which its actual return exceeds that predicted by the capital asset pricing model c. The degree to which diversifiable risk is eliminated d. How much reward an investor is getting for each unit of risk assumedich of the following will not reduce risk in a portfolio? Select one: a. Selecting two securities that are perfectly positively correlated. b. Selecting two securities that are positively correlated. c. Selecting two securities that are perfectly negatively correlated. d. Selecting two securities that are negatively correlated.
- When comparing the forward hedge to the options hedge, the MNC can easily determine which hedge is more desirable, because the cost of each hedge can be determined with certainty. Group of answer choices True FalseWhich one of the following is a property of a pure arbitrage portfolio?a. Negative investment.b. Zero return.c. Positive systematic risk.d. Zero total risk.A negative alpha would mean that a the portfolio have earned enough return given the amount of risk he was taking a. maybe b. it depends c. false d. true
- When comparing NPV and IRR, which is incorrect? With NPV, the discount rate can be adjusted to take into account increased risk and the uncertainty of cash flows With IRR, cash flows can be adjusted to account for risk NPV can be used to compare investments of various size or magnitude Both NPV and IRR can be used for screening decisionsSystematic risk is diversifiable, so it is an investment's relevant risk. Unsystematic risk is O True FalseWhich of the following is TRUE? High-risk investments always have high returns If you invest in a risky investment, you are guaranteed to have a high return. On average, an investor will earn high returns on a low-risk investment On average across investments and over time, riskier investments have higher returns. A high-risk investment will never have a total loss.
- Select all that are true with respect to systematic and unsystematic risk. Group of answer choices Systematic risk is unimportant when estimating expected returns Unystematic risk is unimportant when estimating expected returns Total risk (Systematic + Unsystematic) is the key risk measure one needs to estimate expected returns In a well diversified portfolio, unsystematic risk is largely eliminated A key reason why the risk-return tradeoff is better for portfolios than in individual assets is because combining assets into portfolios reduces unsystematic risk A key reason why the risk-return tradeoff is better for portfolios than in individual assets is because combining assets into portfolios reduces systematic riskConstruct a plausible graph that shows risk (asmeasured by portfolio standard deviation) on thex-axis and expected rate of return on the y-axis.Now add an illustrative feasible (or attainable) setof portfolios and show what portion of the feasibleset is efficient. What makes a particular portfolioefficient? Don’t worry about specific values whenconstructing the graph—merely illustrate howthings look with “reasonable” dataWhich statement is true? Multiple Choice ___ The larger the standard deviation, the lower the total risk. ___ The larger the standard deviation, the higher the total risk. ___ The larger the standard deviation, the more portfolio risk. ___ The standard deviation is not an indication of total risk.