A negative alpha would mean that a the portfolio have earned enough return given the amount of risk he was taking a. maybe b. it depends c. false d. true
Q: Which one of the following conditions determines the investor’s overall optimal portfolio? a. The…
A: Hi, since you have posted multiple questions, we will answer the first one as per authoring…
Q: The probability distribution of a less risky expected return is more peaked than that of ariskier…
A: Probability distribution for completely certain return will show a straight vertical line. The…
Q: When describing the attitude of investors towrds risk, which statement is correct? A.Investors may…
A: Risk attitude of an investor can be classified into three category i.e. risk seeker, risk averse and…
Q: define risk in terms of variance or standard deviation of actual returns around an expected return.…
A: The right answer is d. Investment D: Expected Return =10% , Standard deviation=15%
Q: Which of the following choices best completes the following statement? Explain. An investor with a…
A: Investing is a critical component of wealth growth. It enables the investor to fight inflation,…
Q: Assume that using the Security Market Line (SML) the required rate of return (RA) on stock A is…
A: Computation of the expected return using SML equation: Market rate is RM Let X be the required…
Q: As one moves to the right along an investor’s efficient frontier, a set increase in risk is most…
A: The correct answer is “Option C”.
Q: Use the following three statements to answer this question Risk means the probability that the…
A: Statement 1:- Risk is the chance or the outcome of the difference between the initial investment…
Q: b) The covariance between stocks A and B is 0.0014, standard deviation of stock A is 0.032, and…
A: The most relevant figure is (a) that reflects the risk-return characteristics of stock A and stock…
Q: Would this asset be considered more or less risky than the market? The asset is a. Equally as…
A: An assets risk is represented by stock Beta which indicates that how much movement of stock with…
Q: 7. The utility score a typical investor would assign to a particular portfolio, other things equal,…
A: The utility score of an investor depends on return and total risk. The Capital Market Line shows the…
Q: A portfolio that is positively correlated with the market portfolio but not particularly sensitive…
A: In statistics, +1.0 beta value represents a perfect positive correlation. 0 denotes no correlation…
Q: If a portfolio has a positive investment in every asset, can the beta of the portfolio be less than…
A: Beta of the portfolio is the weighted average of individual asset's betas in the portfolio
Q: Use the following CAPM equation for a portfolio to answer the questions that follow: E(RP) = RF + βP…
A: Here, E(RP) is 4.2% RF is 1 % βP is 0.8 RM is 5% Actual Portfolio Return is 6%
Q: If two returns are positively related to each other, they will have a ________, and if they are…
A: In the given question we are given 4 options regarding a statement and we need to choose correct…
Q: In the Table below , which portfolio (s) is (are) inefficient (s)? Portfolio A B C E F Expected…
A: In order to check which portfolio is inefficient, we need to study the table thoroughly.
Q: Security A offers an expected rate of return of 12% with a standard deviation of 18%, and security B…
A: The question is based on the concept of investment management. The selection of asset depend on the…
Q: In the context of CAPM, a risky asset with negative beta (beta<0) will have a positive expected…
A: CAPM describes the relationship between risk of security and expected return. CAPM is the expected…
Q: If a portfolio has a positive investment in every asset, can the standard deviation of the portfolio…
A: A portfolio is a group of different assets. The returns and risks of the portfolio depend on the…
Q: Assume that using the Security Market Line (SML) the required rate of return (RA) on stock A is…
A: Calculate the expected return using SML equation as follows: Expected return = Risk free rate +…
Q: d. Calculate the variance and standard deviation of the portfolio assuming that the correlation…
A: The variance and standard deviation of a portfolio: The possibility that the actual outcome will be…
Q: Beta is which of the following: A) standard deviation. B) total risk. C) Beta is the relationship…
A: option C is correct Beta is the relationship which is between an investment's return, and the…
Q: Use the following three statements to answer this question: 1. Risk means the probability that the…
A: 1 Statement:- Risk is the chance or the outcome of the difference between the initial investment…
Q: A zero-investment portfolio with a positive alpha could arise if:a. The expected return of the…
A: According to the Capital Asset pricing model, required rate of return is the sum of the risk free…
Q: estment with higher risk, regardless to the return then he is following a strategy. O a. risk-aware…
A: Here, it is required to identify the correct option.
Q: Given the beta is a relative measure of systematic risk, it is reasonable to assume that there…
A: Systematic risk cannot be diversified and is correlated with that of the market portfolio. All…
Q: The security market line depicts: a. Expected return as a function of systematic risk (indicated…
A: The security market line (SML) is a graphical representation of the capital asset pricing model…
Q: Can the standard deviation of a portfolio be zero? Explain your answer.
A: Standard deviation of a portfolio measures the volatility of returns,i.e. how much the returns…
Q: Portfolio provides average risk but much lower return. The key is the negative correlations among…
A: A portfolio is a term used for a collection of a wide range of assets like bonds, stock,…
Q: What is a risk measure? a Alpha b Required return on the market portfolio c Standard deviation of…
A: Risk measures are factual measures that are chronicled indicators of speculation hazard and…
Q: choose which one ? 3.Assume CAPM holds. What is the correlation between an efficient portfolio and…
A: The question is related to Portfolio Management. The details are given.
Q: When a portfolio consists of only a risky asset and a risk-free asset, increasing the fraction of…
A: Principally, it is an established rule that higher the risk, higher the return.
Q: Using the market portfolio and risk free asset, you decided to construct a new portfolio N that has…
A: If an investor holds more than one security then we call it a portfolio investment. It is very…
Q: Which one of the following is a property of a pure arbitrage portfolio? a. Negative investment. b.…
A: Arbitrage is the practice of purchasing and selling the same assets in multiple markets. This is…
Q: Return on a portfolio of two risky assets which are perfectly negatively correlated is equivalent to…
A: Two assets which are having negatively correlated which means risk can be can be reduced to zero.…
Q: A portfolio has an expected rate of return of 0.15 and a standard deviation of 0.15. The risk-free…
A: Investor will select that portfolio that maximizes the returns for a given level of risk.
Q: The probability distribution of a less risky return is more peaked than that ofa riskier return.…
A: Probability distribution: The probability distribution is a tool of statistics that signifies…
Q: If the dispersion around a security's return is larger * the standard deviation is smaller the…
A: Risk refers to probability of losses related to investment. In finance, Standard Deviation is used…
Q: Assume that you have a portfolio of two stocks, X and Y. If the risk of stock X is 1.2 and the risk…
A: 4) For a rational investor, if risk is higher investor demands greater return.
Q: Which of the following statements are true? Explain.a. A lower allocation to the risky portfolio…
A: Sharpe ratio=Expected return of portfolio -Risk free returnStandard Deviation of portfolio Option…
Q: Which of the following(s) would be ways to reject the CAPM? a showing that there exist a stock…
A: CAPM is calculated with the formula below:Return on stock = Risk free rate + Beta (Market return -…
Q: Which statement is true? Multiple Choice ___ The larger the standard deviation, the lower the…
A: Standard deviation :— Standard Deviations is a basic mathematical concepts that measures volatility…
A negative alpha would mean that a the portfolio have earned enough return given the amount of risk he was taking
a. maybe
b. it depends
c. false
d. true
Step by step
Solved in 3 steps
- An investor must look not only at the over-all return of a portfolio but also the risk of that portfolio to see if the investments return compensates for the risk it takes a. it depends b. maybe c. true d.falsed. Would this asset be considered more or less risky than the market? The asset is a. Equally as risky the market portfolio, which has a beta of a. 1 b. less risky than b. 0 c. more risky than c. -1An investment with a high return is likely to be high riskA. TrueB. False
- The the expected return, the the risk. O a. lower; higher O b. higher,lower O c. higher; higher more stable; higherwhich of the folowing models CANNT be applied to measure the Value-at-Risk of a cash-flow portfolio? A.Normal linear VaR B.Monte Carlo VaR C.None of the answers is correct D.Historical VaRSupposing the return from an investment has the following probability distribution Return Probability R (%) 8 0.2 10 0.2 12 0.5 14 0.1 Required: What is the expected return of the investment? What is the risk as measured by the standard deviation of expected returns?
- choose which one ? 3.Assume CAPM holds. What is the correlation between an efficient portfolio and the market portfolio?a.1b.-1c.0d.Not enough informationA portfolio that is positively correlated with the market portfolio but not particularly sensitive to market risk factors would have a beta that is A. Equal to zero. B. Equal to one. C. Less than zero. D. Between 0 and 1. E. Greater than 1.Think about whether a risk-free asset should earn a risk-premium beyond the risk-free rate. Thinking about that should give you an idea of the beta for a risk-free asset. Or, look again at the CAPM equation: E(Ri)=Rf+βi[E(RM)−Rf] Given this equation, what beta sets the E(R) of the risk free asset equal to the risk-free rate? A) zero B) 0.5 C) 1.0 D) its random
- The beta of a market-neutral portfolio is zero. O True O FalseAssume a utility function of ? = ?[?] − 1 ?? 2. Which statement(s) is/are correct about investors with this utility function? [I] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher risk premium [II] An investor with a higher degree of risk aversion chooses the optimal portfolio with lower risk [III] An investor with a higher degree of risk aversion chooses the optimal portfolio with a higher sharpe ratio [IV] The extent to which the investor dislikes risk is captured by ? 2 A. [II] only B. [I], [II] only C. [III] , [IV] only D. [II], [IV] only E. [I], [II], [III] only7. With respect to an investor's utility function expressed as: U = E(r) –Ao?, which of the following values for the measure for risk aversion has the least amount of risk aversion? A. -4. В. О. С. 4.