What is the primary purpose of diversification in a portfolio? a) To maximize returnsb) To reduce riskc) To increase leveraged) To focus on a single asset class
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What is the primary purpose of diversification in a portfolio?
a) To maximize returns
b) To reduce risk
c) To increase leverage
d) To focus on a single asset class
Step by step
Solved in 2 steps
- What is the purpose of diversification in an investment portfolio, and how does it reduce risk?Need answerWhat 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.
- Which are the different assets that have the potential to be combined efficiently in a portfolio that will provide an optimal risk-return relationship for investors?What are the benefits and advantages of diversification for a portfolio?The amount invested is one of the required inputs in a portfolio optimization model. True or False
- What does beta measure?What is diversification in portfolio management?A) Investing in a single industry to maximize returnsB) Spreading investments across different assets to reduce riskC) Concentrating investments in a high-performing stockD) Avoiding low-risk investments entirelyWhat is the purpose of diversification in an investment portfolio, and how does it reduce risk? Need help!
- According to the capital asset pricing model, assets with Lower; lower; unsystematic Higher; higher, unsystematic Lower; higher; unsystematic Higher; higher; systematic Higher; lower; systematic betas have expected returns because betas quantify the degree of risk. Please fill in the blank.The capital asset pricing model expresses the cost of equity as a function of a return on riskless assets, a market premium, and: Select one:a. Unsystematic risk.b. None of these.c. The cost of debt.d. Systematic risk.(a) What is the CML? Include a graph in your answer. (b) Do all individual assets plot below the CML? Why or why not? Explain. c) "As we have the CAPM, we do not need portfolio theory." True or False. Explain
