As the number of stocks in a portfolio decrease, the portfolio's unsystematic risk will O A. increase / B. O C. O D. increase / decrease / decrease / increasing decreasing increasing decreasing at a/an rate.

Q: As we increase the number of stocks in a portfolio, the standard deviation returns of the portfolio…

A: The measurement of the degree to which each data point deviates from the mean or average value is…

Q: Suppose that stocks are exposed to independent risks only so that stock has the following return…

A: Return from the Portfolio is given by Ri,t =mi+si,t where Ri,t= return on the portfolio           mi…

Q: 5. The Sharp ratio of a portfolio is defined as A. the ratio between the return of the portfolio and…

A: Sharpe Ratio: It is a ratio that is named after William Sharpe an American economist & is…

Q: The risk for a portfolio is decreased when the particular stocks tend to move up and down togethe-…

A: The collective investment basket which includes assets from different types as real and financial,…

Q: What will happen to a​ stock’s risk premium if its beta doubles and the market risk premium​…

A: The objective of the question is to understand the impact on a stock's risk premium when both its…

Q: Which two portfolios lie on the same indifference curve? Ignore feasibility. Expected Return, E(r) N…

A: The theory of Efficient Frontier is concerned with considering a cluster of investments and then…

Q: As the number of stocks in a portfolio increase, the portfolio’s systematic risk can either increase…

A: Solution: When an investor invests in equity market, it get exposed to two types of risk- a)…

Q: What is the relationship between correlation and the risk of the portfolio's rate of return? i.…

A: Correlation represents the degree of relationship between the movement of prices of assets in a…

Q: The slope of a regression line when the return on an individual stock's returns are regressed on the…

A: The problem case wants to identify the slope for a regression line that is drawn between the stock's…

Q: In a two-asset portfolio, a covariance of returns between the two securities will lead to the…

A: Adding assets which move in different directions reduces the overall risk. This is because there is…

Q: 1. The diversifiable risk of a portfolio: a. Is correlated with systematic risk. b. Can be made…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Which of the following statements about CAPM is true? a. The expected return of a zero-beta security…

A: CAPM is the capital asset pricing model. As per CAPM expected return as follows: Expected return =…

Q: 1. Beta is positively related A. the degree of correlation between a stock's return and the market…

A: Risk is a predictable loss or uncertainty that may happen and may not happen. The business owner and…

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A: The objective of the question is to identify what is measured by the beta of a security among the…

Q: Suppose that you have to choose an optimal portfolio from a list of n stocks. Stock i has expected…

A: The minimum variance portfolio:A rational investor is a person who invests in a portfolio on the…

Q: Duration is important in understanding a fixed income portfolio because A. it is used in the capital…

A: When the porfolio is designed by incorporating some of the securities which has fixed interest…

Q: Adding more stocks to his/her portfolio will result into which one of the following? specific risk…

A:

Q: The market portfolio (M) has the expected rate of return E(rM) = 0.12. Security A is traded in the…

A: Capital Asset Pricing Model The capital asset pricing model is a commonly used method in finance…

Q: risk premium (RP) expected return on a portfolio,r^P realized rate of return, r¨ diversification…

A: 1) Risk premium is the return you earn over and above the risk-free rate. It is calculated by…

Q: if asset A has lower volatility than asset B, then it contributes less to the overall volatility…

A: Volatility is change in expected rate of assets from the mean return and it shows the risk involved…

Q: Is the following statement true or false? Explain your answer.

A: Step 1   Portfolio diversification is the act of investing your money across a variety of asset…

Q: A stock's risk has a component called _____________________, which can be minimized as we add more…

A: Systematic risk is the risk that refers to entire market and it is not avoidable. this risk arises…

Q: Higher a stock’s volatility, why does the higher the probability of large increases or decreases in…

A: Stock Volatility:   Volatility is defined as a statistical measure of the dispersion of the returns…

Q: The expected return of a portfolio is simply the weighted average of the expected returns for the…

A: When investors create a portfolio of assets, one of the key metrics of interest is the expected…

Q: Suppose that stocks are exposed to systematic risks only so that stock i has the following return…

A: Return from the Portfolio is given by Ri,t =mi+si,t where Ri,t= return on the portfolio           mi…

Q: The risk associated with the overall market is referred to as _____ risk. a. unsystematic b.…

A: (a) Unsystematic risk also known as nonsystematic risk which refers to the risk that is unique for…

Q: An efficient portfolio is one that:   Select one: a.   maximises return for a given level of…

A: Efficient Portfolio is the Portfolio or group of stocks invested which maximises the expected rate…

Q: Hedging a portfolio   a. Will generate above average returns when options expire   b. none of…

A: Hedging a portfolio means using financial instruments and financial market strategies so that…

Q: For a market timer, the ________ will be higher when the market risk premium is higher Select one:…

A: The portfolio beta will be reflective of the systematic risk associated with a particular asset and…