When forming a portfolio of 20 stocks, the first 10 stocks usually than the last 10. Select one: a.have a greater diversification benefit b.have less systematic risk c.have the same diversification benefit d.have a smaller diversification benefit

When forming a portfolio of 20 stocks, the first 10 stocks usually than the last 10. Select one: a.have a greater diversification benefit b.have less systematic risk c.have the same diversification benefit d.have a smaller diversification benefit

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

See similar textbooks

Related questions

Q: portfolios

A: Assessing the risk and reward related with your portfolio is essential to make the best investment…

Q: Draw the profit diagram (profit not payoff) of a portfolio consisting of a long position in two call…

A: The payoff diagram for a portfolio consisting of various long and short positions in call options…

Q: As the number of stocks in a portfolio increase, the portfolio’s systematic risk can either increase…

A: Solution: When an investor invests in equity market, it get exposed to two types of risk- a)…

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: Could a more optimal portfolio, that is, one containing some other combination of stocks that would…

A: The question is based on the concept of optimal portfolio, an optimal portfolio is a theoretical…

Q: A mean - variance optimising investor forms a portfolio of a risky stock and the risk - free asset.…

A: Answer image:Allocation of Capital between Risk free assets and Optimal risky portfolio can be…

Q: A portfolio manager forms two well‐diversified portfolios that are each sensitive to the single…

A: Arbitrage pricing theory (APT) is one of the financial model that is considered to be a multi factor…

Q: Which of the following statements is CORRECT? a. The higher the correlation between the stocks in…

A: The objective of the question is to identify the correct statement about portfolio risk and…

Q: A stock's standard deviation determines how the stock affects the riskiness of a diversified…

A: The standard deviation measures total risk and beta measures the market risk. The statement mentions…

Q: As a portfolio manager, you are required to take investment decision from the following two…

Q: Which of the following is TRUE? You should choose a stock with the greater Jensen’s alpha…

A: Jenson's alpha, Treynor ratio, Sharpe ratio are the portfolio measurement ratios which measures the…

Q: Pick the correct statement: a. The Optimal Risk Portfolio and the Overall Optimal Portfolio are the…

A: An efficient portfolio is referred to as the most preferred by investors due to its risk or reward…

Q: Consider a portfolio where equal investment is made in each of the n stocks. Thus, the proportion…

A: Portfolio variance is a measure used in finance to quantify the overall risk or volatility of a…

Q: You have chosen a stock for your two-asset portfolio and you need to choose one more stock. Which of…

A: Portfolio is combination of stocks in different proportions so as to minimize the risk and increase…

Q: Stock A has a standard deviation of 3.5% while stock B has a standard deviation of 4.6%. If both…

A: Standard deviation is a variation in the mean value of given data. Standard deviation is a…

Q: Which two of the following options correctly give rules for portfolio theory? A) Portfolio…

A: Due to diversification of portfolio overall return increases and but overall risk decreases due to…

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: Select all that are true with respect to the historical risk-return tradeoff for portfolios, and for…

A: Portfolio refers to a bucket of assets in which different stocks, securities, bonds, commodities etc…

Q: A manager who evaluates portfolios' investment performance adjusted for market risk is most likely…

A: Portfolio Performance metrics: There are several portfolio performance metrics that can be used to…

Q: The additional return over the risk-free rate needed to compensate investors for assuming an average…

A: Basis the general principle that higher risk security do have the higher returns, it is known that…

Q: Increasing the number of stocks in a portfolio from 10 to 50 would most likely A. Increase the…

A: As the number of stocks in a portfolio increases the correlation between the stocks in the portfolio…

Q: Table 7.7 Estimated Means and Standard Deviations of Stock Returns Stock Mean Standard Deviation 123…

A: Portfolio return:A portfolio return is a measurement of the performance of a collection of…

Q: calculate the beta of the portfolio below consisting of assets x, y and z. discuss the meaning of…

A: Beta of an asset represents the volatility with respect to the market. It measures the systematic…

Q: a) Risk can be separated into systematic and unsystematic risk. Define systematic and unsystematic…

A: The fraction of total risk produced by conditions beyond a company's or individual's control is…

Q: Use the following table to answer the questions a-c below. Standard deviation of risky portfolio 3.5…

A: Note: We’ll answer the first question, including sub-parts since the exact one wasn’t specified.…

Q: Explain how the following parameters are used for analyzing a stock (or portfolio). Include in your…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: Value-at-risk (VaR) can be defined as: Group of answer choices A. The highest value of a portfolio…

A: Portfolio refers to basket of different financial assets in which investment is made by single…

Q: . Consider the returns of two shares, A and B, under three possible scenarios: Compute Scenario…

A: In order to calculate the minimum variants we need to first calculate the expected written and…

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: In a market cap -weighted index, a higher number of shares outstanding will definitely translate…

A: Shares issue is one of the important source of finance being used. There can be common shares or…

Q: Suppose that you use Arbitrage Pricing Theory (APT) to evaluate well-diversified portfolios. The…

A: Arbitrage pricing theory is a multi factor assets pricing model which is based on that assets return…

Q: risk premium: (a) The risk premium indicates the amount of compensation investors require for…

A: Market risk premium or the risk premium is the extra returns that is required by the invester for…

Q: A stock's risk has a component called _____________________, which can be minimized as we add more…

A: Systematic risk is the risk that refers to entire market and it is not avoidable. this risk arises…

Q: You are putting together a portfolio made up of four different stocks. However, you are considering…

Q: Diversify portfolio are recommended because it lowers risk exposure. Investing in indexes is one way…

A: The index investment is that fund which represents the whole market. The index is a benchmark and…

Q: What historic data is needed to obtain these parameter estimates? In the table below, obtain the…

A: In the given question, the estimates of alpha and specific risk obtained using historical data of…

Q: Based on the hypothetical portfolios provided in the table below, which of the portfolios would lie…

A: Portfolios lying on the efficient frontier are considered the most desirable as they provide the…

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: For a market timer, the ________ will be higher when the market risk premium is higher Select one:…

A: The portfolio beta will be reflective of the systematic risk associated with a particular asset and…

Q: Consider two well-diversified portfolios: Portfolio 1 has an expected return of 8% and a beta of…

A: REWARD TO RISK RATIO : = (EXPECTED RETURN - RISK FREE RATE) / BETA

Question

When forming a portfolio of 20 stocks, the
first 10 stocks usually
than the last 10.
Select one:
a.have a greater diversification benefit
b.have less systematic risk
c.have the same diversification benefit
d.have a smaller diversification benefit

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

VIEW

Step 2

VIEW

Step by step

Solved in 2 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

Baghiben
a. Using the data provided in problem 3, determine the return and risk for a portfolio made up of the following three stocks if you want to distribute your investment as follows: 20% in ADRE; 65% in MSFT and 15% in GOOG.b. How would the portfolio be affected if you distributed your investment in the following way: 30% in ADRE; 25% on MSFT and 45% on GOOG?c. Which of the two portfolios would a risk seeking investor prefer and why?
Evaluate this statement: For any two-stock portfolio, a correlation coefficient of -1.0 guarantees a portfolio risk of zero.
You are given the following information concerning three portfolios, the market portfolio, and the risk-free asset: Op 1.45 1.20 0.75 1.00 Portfolio: X Y Z Market Risk-free Rp 11.00% 10.00 8.10 10.40 5.20 Information ratio Op 33.00% 28.00 18.00 23.00 0 Assume that the tracking error of Portfolio X is 9.10 percent. What is the information ratio for Portfolio X? Note: A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answer to 4 decimal places. 02148 0
25) Given the following correlation matrix, a risk-averse investor would most likely prefer which of the following 2-stock portfolios (all else equal)? Stock A B C D A +1 B +0.8 +1 C +0.2 -0.55 +1 D -0.15 -0.78 +0.3 +1 Select one or more: A and C. C and B A and B C and D. A and D D and B
Use the following table to answer the questions a-c below. Risky Portfolio Expected return on risky portfolio Standard Risk-free Sharpe-ratio deviation of risky | return portfolio 3 1 8 3 2 10 4 3 3 12 4.9 3 4 14 6 3 a. Calculate the Sharpe ratio for each portfolio b. Identify the optimal portfolio from the above 4
PLS HELP ASAP
Portfolio theory with two assets E(R1)=0.15 E(01)= 0.10 W1=0.5 E(R2)=0.20 E(02) = 0.20 W2=0.5 Calculate the expected return and the standard deviation of the two portfolios if r1,2 = 0.4 and -0.60 respectively.
9. Suppose you plan to form your overall investment portfolio in two steps: STEP 1: Choose a portfolio of stocks with a zero position in the risk-free asset. STEP 2: Allocate your money between the portfolio from Step 1 and the risk-free asset. Suppose you can borrow and lend as much as you want at the risk-free rate in Step 2. Let Erp be the expected return of the Step 1 portfolio. Let Var(rp) be the variance of the return of the Step 1 portfolio. Let rf be the risk-free rate. How will you form the Step 1 Portfolio? Set the Step 1 portfolio to maximize Erp SettheStep1portfoliotominimizeVar(rp) Set the Step 1 portfolio to maximize Erp - Var(rp) Set the Step 1 portfolio to maximize the ratio Erp/Var(rp) Set the Step 1 portfolio to maximize the ratio (Erp- rf)/Var(rp) None of the above.
b. As an equity portfolio manager, you may use certain risk-adjusted performance measures. Describe and discuss the following measures of performance evaluation! Treynor Index, William Sharpe, Michael Jensen Using the following table evaluate which is better than other using three different measure of performance evaluation. Asset X E(R)% 12 beta Stdv 1.25 16 Y 11 1.0 12 Risk-free 3 0 0 Market index 12 1 12
Explain well all question with proper answer. And type the answer step by step.
1) Which one of the following portfolios might be expected to exhibit less specific risk? A) Ten random stocks; portfolio beta = 1.0 B) Twelve random stocks; portfolio beta unknown C) Three random stocks; portfolio beta = 1.2 D) Five random stocks; portfolio beta = 0.8 %3D

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS