Investments
11th Edition
ISBN: 9781259277177
Author: Zvi Bodie Professor, Alex Kane, Alan J. Marcus Professor
Publisher: McGraw-Hill Education
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Question
Chapter 8, Problem 13PS
A
Summary Introduction
To calculate: The standard deviation of the stocks.
Introduction: To measure the risk of the portfolio standard deviation is used. It shows the fluctuations of the quantities around the mean value. Low value means all values are close to mean value but high value means all values are spreading.
B
Summary Introduction
To calculate: The systematic risk and unsystematic risk of the stocks.
Introduction: The systematic risk also known as market risk or undiversified risk. Systematic risk is defined as the risk of the market segment. This type of risk is unpredictable in nature and not removable. Unsystematic risk belongs to the specific company or firm. Other names are residual risk or specific risk.
C
Summary Introduction
To calculate: The covariance and correlation of the stocks to the market index.
Introduction: The covariance is used to determine the movement of the two assets. If both are moving same direction then value of covariance is positive otherwise it is negative. Correlation defined as the dependency of the stocks on each other.
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Students have asked these similar questions
To determine an optimal portfolio of investments when the available choices are divisible, the investment choices should first be ranked in increasing order based on which of the following? a. FW b. Initial investment c. IRR d. PW
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E(rA) = 13% E(rB) = 15%
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