assets that you add it to ii. The amount of a portfolio's risk that is diversified away depends on market risk premium iii. The amount of a portfolio's risk that is diversified away depends on risk-free rate of interest iv. The amount of a portfolio's risk that is diversified away depends on weights of the assets that you add it to O i and ii O ii and iii iii and iv O i and iv O ii, iii and iv

Q: Which of the following is a false statement of the market price of risk found in the Capital Market…

A: Portfolios that blend risk and return optimally are represented by the capital market line (CML).…

Q: hich one of the following is not a property of a pure arbitrage portfolio? a. Zero investment. b.…

A: Arbitrage is buying and selling of securities in two different markets to take advantage of…

Q: The risk for  ______________ portfolio is essentially equivalent to the systematic risk.   a. a…

A: Risk is an important part of finance in general and investing in particular.   Risks in investing…

Q: Economy Probability Stock A Stock B Recession -30% -20% 10% 5% 40% 15% Average Boom 0.25 0.50 0.25…

A: Formula for standard deviation in every state of economy is SD =(A-A bar)2*P where A=Return of stock…

Q: An inflation hedge is an asset that increases in value at a rate equal to or greater than the rate…

A: Hedging is technique of reducing risk. This reduction in risk also results typically in a decrease…

Q: Portfolio standard deviation is negatively associated with the covariance among the assets in the…

A: The portfolio standard deviation is the financial measure which computes the investment risk and…

Q: How does the creation of a portfolio reduce risk? What type of assets should be included in a…

A: Introduction Portfolio: Any combination of financial assets, such as stocks, bonds, and currency, is…

Q: This question relates to the two types of risk and to diversification. a)What is specific risk?…

A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…

Q: Which of the following factors is most likely to affect the level of systematic risk in a portfolio?…

A: Systematic risk-It is a risk that is impossible to completely avoid as the risk is inherent to the…

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: The contribution of an individual asset to the riskiness of a fully diversified portfolio depends…

A: A portfolio is made up of two or more than two stocks. A well-diversified portfolio is that…

Q: Why does standalone risk differ from portfolio risk? Explain and give examples! Relates your answer…

A: While making an investment, an investor is required to thoroughly examine all types of risks and…

Q: Active portfolio risk is defined as  Group of answer choices the return difference between the…

A: Active portfolio risk is based on active portfolio return. Active portfolio return is the difference…

Q: What is the expected return on a portfolio? How can the expected return on a portfolio be…

A:

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: Under Capital Market Theory, the relevant risk to consider with any security is: (a) Its correlation…

A: Under the Capital Asset Pricing Model (CAPM):Required rate of return = Risk-free rate + (Market…

Q: Which statement is not true regarding the market portfolio? Group of answer choices a. It includes…

A: A diversified investment portfolio comprising all marketable assets is represented by the…

Q: risk premium: (a) The risk premium indicates the amount of compensation investors require for…

A: Market risk premium or the risk premium is the extra returns that is required by the invester for…

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: How does the diversification of an investor’s portfolio avoid risk?

A: Portfolio investments mean investments in the group of assets, securities, bonds, etc. Investments…

Q: The risk of the portfolio depends not only on the individual risks of the assets but also on the…

A: A portfolio refers to a collection or combination of financial assets held by an individual,…

Q: Portfolio theory tends to define risky investments in terms of just two factors: expectedreturns and…

A: Introduction In portfolio theory, the risk and return of investments are often simplified into two…

Q: Compare and contrast systematic and unsystematic risk and how it affects a portfolio.

A: Risk in a portfolio refers to the likelihood of losing money or not achieving the desired returns on…

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.