For a diversified portfolio including a large number of stocks: А. the weighted average of the betas goes to zero. В. the weighted average of unsystematic risks goes to zero. С. the weighted average of expected returns goes to zero. D. the return of the portfolio goes to zero.
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- Efficient portfolios Figure 8.11 purports to show the range of attainable combinations of expected return and standard deviation. a. Which diagram is incorrectly drawn and why? b. Which is the efficient set of portfolios? c. If r, is the rate of interest, mark with an X the optimal stock portfolio. rf A (a) B A (b) BThe market risk premium is 8 percent and the risk-free rate is 5 percent. Which stock has the most systematic risk? Which one has the most unsystematic risk? Which stock is “riskier”? Explain.1. Which of the following is INCORRECT? a All of a stock's risk could be unsystematic. b. A negative beta stock has an expected return less than the risk-free rate. c. Anticipated returns on any given stock are always greater than 0. d. Two assets with a correlation of -1 could be combined to create a portfolio with a standard deviation of zero (no risk). 2. Which of the following measures the total risk of a portfolio? a. Beta b. Standard Deviation c. Correlation Coefficient d. Alpha 3. Which of the following stocks have the highest systematic risk? a A stock with high correlation to the market and high returm volatility. b. A stock with low correlation to the market and a high return volatility. c A stock with high correlation to the market and a low return volatility. d. A stock with low correlation to the market and a low return volatility. 4. Which of the following companics have the lowest systematic risk? a A company that sells soups (Campbells), beta=0.60 b. A coffee company…
- If the risk-free rate increases, while everything else stays the same, then Select one: O A. the budget line of the portfolio does not change. Ов. the budget line of the portfolio becomes flatter. Oc. the budget line of the portfolio becomes steeper. OD. the budget line of the portfolio parallelly moves up.Answer full question.thank youSuppose Caroline is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds.CombinationFraction of Portfolio in Diversified StocksAverage Annual ReturnStandard Deviation of Portfolio Return (Risk)(Percent)(Percent)(Percent)A 0 1.50 0B 25 3.00 5C 50 4.50 10D 75 6.00 15E 100 7.50 20There is a relationship between the risk of Caroline's portfolio and its average annual return.Suppose Caroline currently allocates 75% of her portfolio to a diversified group of stocks and 25% of her portfolio to risk-free bonds; that is, she chooses combination D. She wants to reduce the level of risk associated with her portfolio from a standard deviation of 15 to a standard deviation of 5. In order to do so, she must do which of the following? Check all that apply. Sell some of her stocks and use the proceeds to purchase…
- Typed plz And Asap ThanksE2K To get the maximum benefit of diversification, an investor should OA. include in his portfolio stocks whose returns are not correlated with each other OB. include in his portfolio stocks whose returns are positively correlated with each other OC. include only one stock in his portfolio. OD. include in his portfolio stocks whose returns are negatively correlated with each other
- Stock ABC has a Forward for December at: $450, Is it reasonable that A PUT option on ABC, with a strike of $500, costs $45? A. No because the minimum intrinsic is $50. B. No, because $35 feels low for a stock with such a high price per share. C. Yes because Intrinsic is $40, Extrinsic is $5 D. Yes because it depends on the distribution; that is defined by the volatility and time to maturityAssume that an economy can have four states: Severe recession, Mild recession, Normal growth, Boom. Probability of each scenario, stock and bond annual returns in that scenario are provided below. Let's also assume that you are creating a portfolio with 65% stocks and 35% bonds. Economy State Severe recession Probability 0.20 Stock Return (%) Bond Return (%) -37 -9 Mild recession 0.30 -11 15 Normal growth 0.40 14 8 Boom 0.10 30 -5 How much is the annual standard deviation of Stock returns? Enter your answer in the following format: 0.1234 Hint: Answer is between 0.1938 and 0.23736