if diversification is desired, would you seek investments with high correlation?

Q: As one adds more assets to a portfolio in order to achieve diversification, what will happen to the…

A: Diversification is referred to as the process in which more assets are added by the investors which…

Q: How do an investment's required rate of return vary with perceived risk? Explain with an example?

A: Required rate of return refers to the rate which the investors expects from their investments. This…

Q: Can the Broader Diversification Increase Expected Return?

A: The concept of portfolio diversification is nothing but including unrelated assets in the…

Q: What is the capital asset pricing model (CAPM)? What does it tell us about the required return on a…

A: The required rate of return of a security is the minimum return an investor will demand from the…

Q: The desired rate of return on an investment should reflect the degree of risk involved. A.   True…

A: Riskier investments may give higher returns to the investors as they provide favorable ratio of risk…

Q: Which of the following decision criteria is the easiest to use and very popular among investors?…

A: The capital budgeting process uses different methods to analyze the projects. Each method has…

Q: When considering multiple possible investments, why are rates of return preferable than monetary…

A: An investment's net profit or loss over a certain period expressed as a percentage of the…

Q: How Broader Diversification Increases Expected Return?

A: The expected return on an investment refers to the weighted average of estimated returns and…

Q: Why are rates of return superior to dollar returns when comparingdifferent potential investments?

A: A rate of return (ROR) refers to the net income or loss of an investment over a given timeframe as a…

Q: What does it mean that portfolio diversification can reduce risk, and how does the efficient…

A: Risk is the measurable probability of loss on an investment. It includes the possibility of losing…

Q: Financial advisors generally recommend that their clients allocate more to higher risk–return asset…

A: M-V model represent as Mean-Variance model.

Q: Which of the following investment strategies involves generating a higher expected rate of return…

A: The risk and return of investment are usually positively related. An investor cannot earn an extra…

Q: If we compare the betas of various investment opportunities, why do the assets that have higher…

A: Volatility of a particular stock (or security) is determined by measuring the beta. Beta is an…

Q: Combining two or more assets in an investment portfolio will typically lead to diversification…

A: A portfolio's investments are mixed together in a broad variety as part of the risk management…

Q: Another name for the expected value of an investment would be: Answer a. The mean value b. The…

A: An Expected Value is an anticipated value for an investment at some point in future.

Q: The profitability index is another method to evaluate capital investments. If you are trying to…

A: A profitability index is a quantitative tool that can help decide whether to accept or reject an…

Q: Explain what is the criterion used by a rational investor for choosing a financial investment in…

A:

Q: In general, the the correlation between asset returns, the the risk reduction that investors can…

A: Correlation measures the extent to which two variables are interrelated. The correlation coefficient…

Q: Explain the unique risk and the market risk. What risk can be reduced when you diversify your…

A: The question is based on the concept and types of risk considered in portfolio selection and…

Q: When assessing investment performance, what statistical notion do many portfolio managers employ to…

A: Portfolio managers are those who make investing decisions. They create and implement investment…

Q: What is the expected return of investing in asset M​ alone

A: Expected Return = (probability of boom*return on boom)+(probability of normal*return on…

Q: Which are the different assets that have the potential to be combined efficiently in a portfolio…

A: The efficient frontier graphically represents portfolios that maximize returns for the risk assumed.…

Q: why do we need to quantify the investment risk and returns?

A: Almost all investments possess certain risks and return.

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.