Answered: The risk for ______________ portfolio…

The risk for ______________ portfolio is essentially equivalent to the systematic risk. a. a partially diversified b. any investment c. a well-diversified d. a non-diversified

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter13: Investment Fundamentals

Section13.3: Risks And Other Factors Affect

Problem 2CC

See similar textbooks

Related questions

Q: Which of the following measures reflects the excess return earned on a portfolio per unit of its…

A: Treynor's measure is the measure of excess return earned per unit of beta of portfolio. Treynor…

Q: assets that you add it to ii. The amount of a portfolio's risk that is diversified away depends on…

A: Step 1 Unsystematic risk refers to a general risk to the company or industry. Informal risk is also…

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: 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: Which of the following statements regarding non-systematic risk, systematic risk and total risk…

A: Systematic risk is the risk derived from the market and which is measured by the beta of the stock…

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: Capital asset pricing theory asserts that portfolio returns are best explained by:a. Economic…

A: Capital Asset Pricing Theory is used to determine the relationship between the systematic risk of an…

Q: . The difference between the expected (c equired) return for the market portfolio ar he risk-free…

A: This pertains to the CAPM (capital asset pricing model). The difference between expected return on a…

Q: risk premium (RP) expected return on a portfolio,r^P realized rate of return, r¨ diversification…

A: 1) Risk premium is the return you earn over and above the risk-free rate. It is calculated by…

Q: The security market line describes the expected return for

A: Security market line (SML) is the representation of the capital asset pricing model. It displays the…

Q: Standard deviation of portfolio returns is a measure of ___________. Group of answer choices…

A: Standard deviations of portfolio give the standard deviations of return of portfolio.

Q: As diversification increases, the firm-specific risk of a portfolio approaches A. 1. B. infinity.…

A: Diversification

Q: The expected return of a portfolio is simply the weighted average of the expected returns for the…

A: When investors create a portfolio of assets, one of the key metrics of interest is the expected…

Q: The risk associated with the overall market is referred to as _____ risk. a. unsystematic b.…

A: (a) Unsystematic risk also known as nonsystematic risk which refers to the risk that is unique for…

Q: An efficient portfolio is one that: Select one: a. maximises return for a given level of…

A: Efficient Portfolio is the Portfolio or group of stocks invested which maximises the expected rate…

Q: A well-diversified portfolio is most likely to have: Both systematic and unsystematic risk Only…

A: The diversification is considered as a process of elimination of all the unsystematic risk in the…

Q: The security market line depicts: a. Expected return as a function of systematic risk (indicated…

A: The security market line (SML) is a graphical representation of the capital asset pricing model…

Q: An investor must look not only at the over-all return of a portfolio but also the risk of that…

A: The risk-return trade-off argues that when risk grows, so does the possible reward. Individuals…

Q: When a portfolio is diversified, what type of risk is reduced? Multiple Choice…

A: Unsystematic risk Unsystematic risk is unique to a given business or industry. It is also known as…

Q: When a portfolio consists of only a risky asset and a risk-free asset, increasing the fraction of…

A: Principally, it is an established rule that higher the risk, higher the return.

Q: The measure of risk for a security held in a diversified portfolio is:a. Specific risk.b. Standard…

A: the standard deviation of returns is the measure of risk which measures the dispersion of variables.…

Q: The measure of risk for a security held in a diversified portfolio is: Specific risk. Standard…

A: The portfolio of securities can be called diversified as the portfolio designer includes the…

Q: Which one of the following is a property of a pure arbitrage portfolio? a. Negative investment. b.…

A: Arbitrage is the practice of purchasing and selling the same assets in multiple markets. This is…

Q: Portfolios on the Capital Market Line (CML) have different levels of ____? Idiosyncratic risk…

A: Capital market line shows the risk and return combination of portfolios and it shows the combination…

Q: Required: Extend this expression to allow for the evaluation of any individual risky Asset i.…

A: The capital market line illustrates the anticipated return on investment in relation to its level of…

Q: Describe why a fully diversified portfolio is said to have no unsystematic risk but has systematic…

A: The risk of an investment portfolio can be reduced by diversifying it. Diversification helps to…

Question

The risk for ______________ portfolio is essentially equivalent to the systematic risk.

	a.	a partially diversified
	b.	any investment
	c.	a well-diversified
	d.	a non-diversified

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

The risk associated with the overall market is referred to as _____ risk. a. unsystematic b. diversified c. portfolio d. systematic
The measure of risk for a security held in a diversified portfolio is:a. Specific risk.b. Standard deviation of returns.c. Reinvestment risk.d. Covariance.
Which one of the following is a property of a pure arbitrage portfolio?a. Negative investment.b. Zero return.c. Positive systematic risk.d. Zero total risk.
Which of the following statements regarding non-systematic risk, systematic risk and total risk is/are true? Select one or more:a. As the number of assets within a portfolio increases, the total risk of a portfolio will go to zero.b. A riskfree asset must have zero non-systematic risk.c. A well diversified portfolio must have zero systematic riskd. Under the Capital Asset Pricing Model (CAPM).an asset with zero systematic risk must have expected return equal to the riskfree rate.
The measure of risk for a security held in a diversified portfolio is: Specific risk. Standard deviation of returns. Reinvestment risk. Covariance.
Capital asset pricing theory asserts that portfolio returns are best explained by:a. Economic factors.b. Specific risk.c. Systematic risk.d. Diversification.
Economy Probability Stock A Stock B Recession -30% -20% 10% 5% 40% 15% Average Boom What is the standard deviation of Stock A? 18.8% 24.9% 12.9% 0.25 0.50 0.25 20.0%
Which of the following measures reflects the excess return earned on a portfolio per unit of its systematic risk a. Treynor’s measure b. Sharpe’s measure c. Jensen’s measure d. Total measure
Standard deviation of portfolio returns is a measure of ___________. Group of answer choices total risk systematic risk market risk firm-specific risk unsystematic risk
The security market line depicts: a. Expected return as a function of systematic risk (indicated by beta) b. The market portfolio as the optimal portfolio of risky assets c. The relationship between a security’s return and the return on the index d. Portfolio combinations of the market portfolio and the risk-free asset e. Expected return as a function of volatility
An efficient portfolio is one that: Select one: a. maximises return for a given level of risk. b. maximises risk for a given level of return. c. minimises risk for a given rate of return. d. Both A and C. are efficient portfolios.
A well-diversified portfolio is most likely to have: Both systematic and unsystematic risk Only unsystematic risk Only systematic risk.