In a two-stock portfolio the risk reduction of diversification will be the lowest if Select one: O the correlation is -1. O the correlation is 0. O the covariance is 0. the correlation is 1.

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A:

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A: solution of the given question is like as:on interval…

Q: Can you break down the steps more after log55n = 125? 5n = 125 Take log5 of both sides log55n = 125…

A: The logarithm (log) function is widely used in solving problems in financial mathematics. The…

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A: Share Price: The share price illustrates the present value of the shares that are traded on the…

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A: The objective of the question is to find the optimal solution for the given linear optimization…

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A: Correlation refers to a statistical measure that describes the extent to which two variables change…

Q: local minimum or maximum of a function,

A: A high point is called a maximum . A low point is called minimum. Local maximum means there will be…

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Q: Convert to exponential form. 3) log4 16 = 2

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Q: n 0 1 2 345 67 00 8 9 10 A -$250 $60 $970 B -$200 $90 $90 $60 $60 Net Cashflow C -$70 $20 $10 $5…

A: The Internal Rate of Return (IRR) is a financial metric used to measure the potential profitability…

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Q: Finish the formula for Simple Interest. I = Simple intrest, P = Principle, R = rate and T = time.

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A: Certainly! Let's break down each part: (a) Expected values E[X] and E[Y]: - The expected value of a…

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A: y = Asin(kx)A amplitudek = 2π/TWhere T is the periodFrom diagram,A = 5/2T = 3π=> k = 2π/3π =…

Q: Explain quick ratio

A: The formula to compute quick ratio as follows:

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A: The equation for Present Value of an amount is, PV=FV(1+i)n

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Q: What is the difference between YTD and YoY return? Provide an example

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A: For the 3 cubic Bravais lattices :(1) Simple Cubic : Coordination number (Z) = 6So, Γ = νZ = v × 6 =…

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Q: Internal Rate of Return is the discount rate that sets NPV to 0. True or false?

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Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.