Select all that are true with respect to the historical risk-return tradeoff for portfolios, and for individual stocks. Group of answer choices For portfolios, the relation between risk and return is positive and quite strong For individual stocks, the relation between risk and return is positive and stronger than for portfolios The relation between risk and return is stronger for portfolios than it is for individual stocks You get a better risk-return tradeoff if you put assets together in a portfolio
Select all that are true with respect to the historical risk-return tradeoff for portfolios, and for individual stocks. Group of answer choices For portfolios, the relation between risk and return is positive and quite strong For individual stocks, the relation between risk and return is positive and stronger than for portfolios The relation between risk and return is stronger for portfolios than it is for individual stocks You get a better risk-return tradeoff if you put assets together in a portfolio
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Select all that are true with respect to the historical risk-return tradeoff for portfolios, and for individual stocks.
Group of answer choices
For portfolios, the relation between risk and return is positive and quite strong
For individual stocks, the relation between risk and return is positive and stronger than for portfolios
The relation between risk and return is stronger for portfolios than it is for individual stocks
You get a better risk-return tradeoff if you put assets together in a portfolio
Expert Solution
Step 1: Explain risk and return for Portfolio and individual return
Portfolio refers to a bucket of assets in which different stocks, securities, bonds, commodities etc are pooled with different returns over different risks associated with the individual asset.
Risk and return trade off refers to the set of risk when different assets are pooled into one portfolio for eg if one asset is risky for a given period of economy, means return the from this asset is uncertain whereas another asset in the portfolio is less risky or ensures a definite return. This scenario establishes a trade off by averaging the return of both the assets and in this way overall return for the investor is maintained.
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