True of the correlation coefficient in forming a portfolio of two risky investments between their returns in case their gains are ascertained from diversification Introduction: Portfolio involves financial asset grouping viz. currencies, commodities, bonds, stocks and cash equivalents. It also comprises of fund counterparts such as closed funds, exchange traded funds and mutual funds. Non-publicly tradable securities such as private, art and real estate investment are also part of portfolios.

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Answer 1

Question

Chapter 6, Problem 1PS

Summary Introduction

To determine:

True of the correlation coefficient in forming a portfolio of two risky investments between their returns in case their gains are ascertained from diversification

Introduction:

Portfolio involves financial asset grouping viz. currencies, commodities, bonds, stocks and cash equivalents. It also comprises of fund counterparts such as closed funds, exchange traded funds and mutual funds. Non-publicly tradable securities such as private, art and real estate investment are also part of portfolios.

Expert Solution & Answer

Answer to Problem 1PS

The portfolio tends to benefit from diversification as long as the correlation coefficient stands to be less than 1.0.

Explanation of Solution

Correlation coefficient refers to the statistical measure that determines the relationship strength between relative movements associated with 2 variables. The correlation measurement stands to be incorrect if the correlation coefficient stands less than -1.0 and greater than 1.0. In this situation, the return pertaining to component securities does not move with respect to perfect lockstep. The standard deviation of the portfolio stands to be less in comparison to the weighted average of the component's security standard deviation.

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Answer 2

Question

Chapter 6, Problem 1PS

Summary Introduction

To determine:

True of the correlation coefficient in forming a portfolio of two risky investments between their returns in case their gains are ascertained from diversification

Introduction:

Portfolio involves financial asset grouping viz. currencies, commodities, bonds, stocks and cash equivalents. It also comprises of fund counterparts such as closed funds, exchange traded funds and mutual funds. Non-publicly tradable securities such as private, art and real estate investment are also part of portfolios.

Expert Solution & Answer

Answer to Problem 1PS

The portfolio tends to benefit from diversification as long as the correlation coefficient stands to be less than 1.0.

Explanation of Solution

Correlation coefficient refers to the statistical measure that determines the relationship strength between relative movements associated with 2 variables. The correlation measurement stands to be incorrect if the correlation coefficient stands less than -1.0 and greater than 1.0. In this situation, the return pertaining to component securities does not move with respect to perfect lockstep. The standard deviation of the portfolio stands to be less in comparison to the weighted average of the component's security standard deviation.

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Answer 3

Question

Chapter 6, Problem 1PS

Summary Introduction

To determine:

True of the correlation coefficient in forming a portfolio of two risky investments between their returns in case their gains are ascertained from diversification

Introduction:

Portfolio involves financial asset grouping viz. currencies, commodities, bonds, stocks and cash equivalents. It also comprises of fund counterparts such as closed funds, exchange traded funds and mutual funds. Non-publicly tradable securities such as private, art and real estate investment are also part of portfolios.

Expert Solution & Answer

Answer to Problem 1PS

The portfolio tends to benefit from diversification as long as the correlation coefficient stands to be less than 1.0.

Explanation of Solution

Correlation coefficient refers to the statistical measure that determines the relationship strength between relative movements associated with 2 variables. The correlation measurement stands to be incorrect if the correlation coefficient stands less than -1.0 and greater than 1.0. In this situation, the return pertaining to component securities does not move with respect to perfect lockstep. The standard deviation of the portfolio stands to be less in comparison to the weighted average of the component's security standard deviation.

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Answer 4

Question

Chapter 6, Problem 1PS

Summary Introduction

To determine:

True of the correlation coefficient in forming a portfolio of two risky investments between their returns in case their gains are ascertained from diversification

Introduction:

Portfolio involves financial asset grouping viz. currencies, commodities, bonds, stocks and cash equivalents. It also comprises of fund counterparts such as closed funds, exchange traded funds and mutual funds. Non-publicly tradable securities such as private, art and real estate investment are also part of portfolios.

Expert Solution & Answer

Answer to Problem 1PS

The portfolio tends to benefit from diversification as long as the correlation coefficient stands to be less than 1.0.

Explanation of Solution

Correlation coefficient refers to the statistical measure that determines the relationship strength between relative movements associated with 2 variables. The correlation measurement stands to be incorrect if the correlation coefficient stands less than -1.0 and greater than 1.0. In this situation, the return pertaining to component securities does not move with respect to perfect lockstep. The standard deviation of the portfolio stands to be less in comparison to the weighted average of the component's security standard deviation.

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Answer 5

Chapter 6, Problem 1PS

Summary Introduction

To determine:

True of the correlation coefficient in forming a portfolio of two risky investments between their returns in case their gains are ascertained from diversification

Introduction:

Portfolio involves financial asset grouping viz. currencies, commodities, bonds, stocks and cash equivalents. It also comprises of fund counterparts such as closed funds, exchange traded funds and mutual funds. Non-publicly tradable securities such as private, art and real estate investment are also part of portfolios.

Expert Solution & Answer

Answer to Problem 1PS

The portfolio tends to benefit from diversification as long as the correlation coefficient stands to be less than 1.0.

Explanation of Solution

Correlation coefficient refers to the statistical measure that determines the relationship strength between relative movements associated with 2 variables. The correlation measurement stands to be incorrect if the correlation coefficient stands less than -1.0 and greater than 1.0. In this situation, the return pertaining to component securities does not move with respect to perfect lockstep. The standard deviation of the portfolio stands to be less in comparison to the weighted average of the component's security standard deviation.

Answer 6

Chapter 6, Problem 1PS

Summary Introduction

To determine:

True of the correlation coefficient in forming a portfolio of two risky investments between their returns in case their gains are ascertained from diversification

Introduction:

Portfolio involves financial asset grouping viz. currencies, commodities, bonds, stocks and cash equivalents. It also comprises of fund counterparts such as closed funds, exchange traded funds and mutual funds. Non-publicly tradable securities such as private, art and real estate investment are also part of portfolios.

Expert Solution & Answer

Answer to Problem 1PS

The portfolio tends to benefit from diversification as long as the correlation coefficient stands to be less than 1.0.

Explanation of Solution

Correlation coefficient refers to the statistical measure that determines the relationship strength between relative movements associated with 2 variables. The correlation measurement stands to be incorrect if the correlation coefficient stands less than -1.0 and greater than 1.0. In this situation, the return pertaining to component securities does not move with respect to perfect lockstep. The standard deviation of the portfolio stands to be less in comparison to the weighted average of the component's security standard deviation.

Answer 7

Chapter 6, Problem 1PS

Summary Introduction

To determine:

True of the correlation coefficient in forming a portfolio of two risky investments between their returns in case their gains are ascertained from diversification

Introduction:

Portfolio involves financial asset grouping viz. currencies, commodities, bonds, stocks and cash equivalents. It also comprises of fund counterparts such as closed funds, exchange traded funds and mutual funds. Non-publicly tradable securities such as private, art and real estate investment are also part of portfolios.

Answer 8

Expert Solution & Answer

Answer to Problem 1PS

The portfolio tends to benefit from diversification as long as the correlation coefficient stands to be less than 1.0.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Correlation coefficient refers to the statistical measure that determines the relationship strength between relative movements associated with 2 variables. The correlation measurement stands to be incorrect if the correlation coefficient stands less than -1.0 and greater than 1.0. In this situation, the return pertaining to component securities does not move with respect to perfect lockstep. The standard deviation of the portfolio stands to be less in comparison to the weighted average of the component's security standard deviation.

Answer 12

Ch. 6 - Prob. 1PS Ch. 6 - When adding a risky asset to a portfolio of many...Ch. 6 - A portfolio’s expected return is 12%, its standard...Ch. 6 - An investor ponders various allocations to the...Ch. 6 - The standard deviation of the market-index...Ch. 6 - Suppose that the returns on the stock fund...Ch. 6 - Use the rate-of-return data for the stock and bond...Ch. 6 - Prob. 8PS Ch. 6 - Prob. 9PS Ch. 6 - Prob. 10PS

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Answer to Problem 1PS

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