What is the primary goal of portfolio diversification? A) To maximize returns B) To eliminate all risk C) To reduce unsystematic risk D) To increase leverage
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- Is there a relationship between risk and return in building an effective portfolio?(explain)The amount invested is one of the required inputs in a portfolio optimization model. True or FalseWhat does it mean that portfolio diversification can reduce risk, and how does the efficient frontier logically fit into this discussion? include correlation, asset allocation, and asset classes or benchmarks in your answer.
- Explain the differences between an ‘efficient portfolio’ and an ‘efficient market'What does the efficient frontier reflect? Discuss the efficient frontier using insightsfrom the Markowitz’s Portfolio Theory. Also describe the assumptions under which itholds true. This question is related to Investment Analysis and Portfolio ManagementWhy does portfolio analysis advantage is its graphic depiction facilitates communcation?
- AnswerHow does the creation of a portfolio reduce risk? What type of assets should be included in a diverse portfolio? Why should they be included?Which of the following investment strategies involves generating a higher expected rate of return through increasing risk? a. Leverage b. Value at risk c. Diversifying d. Hedging risk
- Capital asset pricing theory asserts that portfolio returns are best explained by:a. Economic factors.b. Specific risk.c. Systematic risk.d. Diversification.How to construct Portfolio of different risk levels, given information about the risk-free rate and the returns on risky assets? What is a systematicrisk? How can we diversify risk efficiency?Question # 3. Markowitz theory indicates to create and construct a portfolio of assets to maximize returns within a given level of risk, or to devise one with a desired, specified and expected level of return with the least amount of risk. Under this broader concept, answer the followings: a) Justify, why an optimal portfolio should lie on security market line curve