The standard deviation of a portfolio Blank______ as the number of securities in the portfolio Blank______. Multiple choice question. increases; increases decreases; decreases decreases; increases stays the same; increases
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The standard deviation of a portfolio Blank______ as the number of securities in the portfolio Blank______.
increases; increases
decreases; decreases
decreases; increases
stays the same; increases
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- As additional securities are added to a portfolio, total risk will generally ________ at a _________ rate. Group of answer choices rise; decreasing rise; increasing fall; decreasing fall; increasingHistorical return data indicate that as the number of securities in a portfolio increases, the standard deviation of returns for the portfolio Blank______. Multiple choice question. fluctuates randomly decreases increases does not changeThe expected return of a portfolio is simply the weighted average of the expected returns for the individual assets within the portfolio. Group of answer choices True False
- As diversification increases, the firm-specific risk of a portfolio approaches A. 1. B. infinity. C. 0. D. (n – 1) × n.As the number of stocks in a portfolio decrease, the portfolio's unsystematic risk will O A. increase O B. O C. D. increase 1 decrease / decrease / increasing decreasing increasing decreasing at a/an rate.As the number of stocks in a portfolio increase, the portfolio’s systematic risk can either increase or decrease. Select one: True False
- What are the the key concepts (e.g., the standard deviation of the portfolio is less than the weighted average of the standard deviations of the stocks in the portfolio)If a portfolio has a positive investment in every asset, can the standard deviation of the portfolio be less than sum of the individual asset's standard deviations in the portfolio? ExplainIn a two-asset portfolio, a ________ covariance of returns between the two securities will lead to the greatest reduction in the variance of the portfolio. O negative O positive O relative systematic
- In the model in Example 7.9, stock 2 is not in the optimal portfolio. Use SolverTable to see whether it ever enters the optimal portfolio as its correlations with stocks 1 and 3 vary. Specifically, use a two-way SolverTable with two inputs, the correlations between stock 2 and stocks 1 and 3, each allowed to vary from 0.1 to 0.9 in increments of 0.1. Capture as outputs the three changing cells. Discuss the results. (Note: You will have to change the model slightly. For example, if you use cells B10 and C11 as the two Solver Table input cells, you will have to ensure that cells C9 and D10 change accordingly. This is easy. Just put formulas in these latter two cells.) Example 7.9 Perlman & Brothers, an investment company, intends to invest a given amount of money in three stocks. From past data, the means and standard deviations of annual returns have been estimated as shown in Table 7.7. The correlations among the annual returns on the stocks are listed in Table 7.8. The company…Portfolio standard deviation is negatively associated with the covariance among the assets in the portfolio. Select one: True FalseConsider the following performance data for a portfolio manager: Benchmark Portfolio Index Portfolio Weight Weight Return Return Stocks 0.65 0.7 0.11 0.12 Bonds 0.3 0.25 0.07 0.08 Cash 0.05 0.05 0.03 0.025 a.Calculate the percentage return that can be attributed to the asset allocation decision. b.Calculate the percentage return that can be attributed to the security selection decision.
