Which of the following is FALSE? O A. A value-weighted portfolio is an equal-ownership portfolio: We hold an equal fraction of the total number of shares outstanding of each security in the portfolio. O B. When buying a value-weighted portfolio, we end up purchasing the same percentage of shares of each firm. OC. In a value-weighted portfolio the fraction of money invested in any security corresponds to its share of the total number of shares outstanding of all securities in the portfolio. O D. To maintain a value-weighted portfolio, we do not need to trade securities and rebalance the portfolio unless the number of shares outstanding of some security changes.

Which of the following is FALSE? O A. A value-weighted portfolio is an equal-ownership portfolio: We hold an equal fraction of the total number of shares outstanding of each security in the portfolio. O B. When buying a value-weighted portfolio, we end up purchasing the same percentage of shares of each firm. OC. In a value-weighted portfolio the fraction of money invested in any security corresponds to its share of the total number of shares outstanding of all securities in the portfolio. O D. To maintain a value-weighted portfolio, we do not need to trade securities and rebalance the portfolio unless the number of shares outstanding of some security changes.

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

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QUESTION ONE Why do most investors hold diversified portfolios? and What is covariance, and why is it important in portfolio theory? Why do most assets of the same type show positive covariances of returns with each other? Would you expect positive covariances of returns between differenttypes of assets such as returns on Treasury bills, General Electric common stock, and commercial real estate? Why or why not? What is the relationship between covariance and the correlation coefficient? and Explain the shape of the efficient frontier. Draw a properly labeled graph of the Markowitz efficient frontier. Describe the efficient frontier in exact terms. Discuss the concept of dominant portfolios, and show an example of one on your graph. Assume you want to run a computer program to derive the efficient frontier for your feasible set of stocks. What information must you input to the program?
Which of the following best describes what investors in shares seek compensation for? The risk-free rate of return plus time value of money OA. O B. The loss of interest on a building society account plus the dividend yield on shares Inflation and risk only OC Sacrifice of immediate use of cash otherwise available for consumption, inflation and risk OD.
Solve soon i will give u 2 like sure Investors are most likely to use what type of valuation across a variety of different securities? a. Discounted Cash Flow Model b. Residual Operating Income Model c. Dividend Discount Model
The market risk premium is defined as __________. A. the difference between the return on an index fund and the return on Treasury bills B. the difference between the return on a small firm mutual fund and the return on the Standard and Poor's 500 index C. the difference between the return on the risky asset with the lowest returns and there turn on Treasury bills D. the difference between the return on the highest yielding asset and the lowest yielding asset
The concept of Portfolio Effect indicates that the more assets added to the portfolio, the less risk of the total portfolio Select one: O True O False Ne Jump to... CHAPTER 5-STOCK VALUA
The slope of the Security Market Line equals to ____, and the slope of Capital Allocation Line equals to____. Select one: A. Beta; Sharpe Ratio B. Market Risk Premium; Sharpe Ratio C. Risk free rate; Volatility D. Market Risk Premium; Volatility
1) Please indicate whether the following statements are true or false. In case of a false statement, briefly specify why the statement is false. 1. A real asset is different from a financial asset because a real asset must take a physical form. 2. In the financial market, an investor buys financial securities from dealers at the ask price and sells financial securities to dealers at the bid price. 3. Mankowitz portfolio theory assumes average investors have a utility function as an increasing and concave function of future portfolio return. 4. According to CAPM, all well-diversified portfolios on the capital market line have the same Sharpe ratio. 5. The Markowitz portfolio theory assumes that investors hold homogenous expectations about risk and returns of financial securities.
Which of the following statements is correct in relation to a stock investment?I. The capital gains yield can be positive, negative, or zero.II. The dividend yield can be positive, negative, or zero.III. The return can be positive, negative, or zero.IV. Neither the dividend yield nor the return can be negative. A. I onlyB. I and II onlyC. I and III onlyD. I and IV onlyE. IV only
The security market line (SML) is an equation that shows the relationship between risk as measured by beta and the required rates of return on individual securities. The SML equation is given below: Required return on Stock = Risk-free return + (Market risk premium) (Stock's beta) If a stock's expected return plots on or above the SML, then the stock's return is sufficient ✓to compensate the investor for risk. If a stock's expected return plots below the SML, the stock's return is insufficient to compensate the investor for risk. The SML line can change due to expected inflation and risk aversion. If inflation changes, then the SML plotted on a graph will shift up or down parallel to the old SML. If risk aversion changes, then the SML plotted on a graph will rotate up or down becoming more or less steep if investors become more or less risk averse. A firm can influence market risk (hence its beta coefficient) through changes in the composition of its assets and through changes in the…
Which statement below is incorrect? Select one: A. The four "V" features of big data include volume, variety, value, and velocity. B. When the price of the underlying asset increases, the call option price will increase while the put option price will decrease. C. The Fama-French High-Minus-Low portfolio (HML) is a strategy that attempts to buy stocks with high prices and sell stocks with low prices. D. The passive mutual funds charge a lower administration fee than the active mutual funds.
Which one of the following expressions about risk and returns is wrong? A. In general, one reason why a stock is riskier than a bond is that because cash flows from a bond are known and promised, whereas cash flows from a stock are neither known nor promised. B. According to CAPM model, a well-diversified portfolio will have a beta which equals to 0. C. Risk premium is the extra return provided on risky assets to compensate for risk. The difference between risky return and the risk-free return. D. Unexpected return happened because new information came to light which caused our expectations about prices and returns to change.
For whom are stocks riskier than bonds? For whom are bonds riskier than stocks? Company A sells heaters and Company B sells air conditioners. Which is the safer investment, Company A stock, Company B stock, or a portfolio containing half of each?

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