A stock's standard deviation determines how the stock affects the riskiness of a diversified portfolio; therefore, it is a better measure of a stock's relevant risk than is the beta-coefficient, which measures total, or stand-alone, risk. Choices: a. TRUE b. FALSE

Q: Answer the following by using mathematical calculations: a) Calculate the expected rate of return…

A: Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: what is the return of stock a what is the return of stockb what is the standard deviation on stock…

A: Given: tate Probability(P) Return A Return B Poor 40% -0.08 -0.15 Normal 35% 0.19 0.14 Good…

Q: Briefly explain what the Beta of a stock means. What values can it take and what do these imply?…

A: Beta is a measure of a stock's volatility in relation to the overall market. If a stock moves less…

Q: Suppose securities A, B, and C have the following expected return and risk.…

A: Stock with lowest coefficient of variance is mean variance dominant stock. coefficient of variance…

Q: Define the terms covariance and correlationcoefficient. How are they related to one another,and how…

A: Covariance refers to the situation which tells about the association between two variables how they…

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: Evaluate the following statement: “Two stocks should be viewed as equally risky because they have…

A: Let us understand the above terms with a help of an example. Say, the Expected return of Stock X is…

Q: Which of the following statements related to risk is (are) true: (i) Beta measures risk that cannot…

A: Risk are of two types - systematic risk and unsystematic risk

Q: If there is a stock which is substantially overvalued, where it should plot relatively to the SML?…

A: SML or Security Market Line:- It is an graphical representation of CAPM model. SML graph is being…

Q: Beta is measure of a stock's _____________________ risk. Select all that apply. A) systematic…

A: There are two types of risk are present: 1. Systematic risk 2. Unsystematic risk.

Q: Fill in the blanks: Stock returns can be explained by the stock's and the stock's A. beta; market…

A: stock return cam be calculated using Capital asset pricing model or dividend discount model.

Q: Which one of the following is correct about individual stocks? Individual stocks are exposed to the…

A: Systematic risk is also known as non-diversifiable risk, and it exist for entire market. It arises…

Q: What is risk aversion, and how is risk aversion related to the expected return on a stock

A: In the world of investment, the risk appetite of the investor is an important consideration when…

Q: Is a put option on a high-beta stock worth more than one on a low-beta stock? The stocks have…

A: Meaning of beta Beta is a sensitive measure of firm specific risk in respect to market risk. It tell…

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: 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: What is relationship between the market risk of a stock and it's expected return?

A: Expected return is directly related to the market risk . Market risk is represented by beta. Higher…

Q: The beta coefficient A stock’s contribution to the market risk of a well-diversified portfolio is…

A: beta coefficient measures the volatality of stock with respect to market.

Q: According to the Capital Asset Pricing Model​ (CAPM), risky stocks pay a risk premium based on their…

A: Answer: True Capital Asset Pricing Model is used to determine the expected return on a stock, which…

Q: What is risk and how is it measured? How is risk measured in a portfolio compared to risk in a…

A: Risk is measured by the amount of volatility, that is, the difference between actual returns and…

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: A stock is in equilibrium if its required return v its expected return. In general, assume that…

A: In order to find whether the stock price is in equilibrium or not one can use CAPM also known as…

Q: What is a characteristic line? How is this line usedto estimate a stock’s beta coefficient? Write…

A: Characteristic line With the help of regression analysis, a straight line is being formed which…

Q: Which of the following statements is CORRECT? Multiple Choice Company-specific risk can be…

A: The unsystematic risk is the company specific risk, the systematic risk is the vulnerability related…

Q: Statement True False When returns on Stock A increase, returns on Stock B also increase. In general,…

A: Standard deviation is a measure of risk. The standard deviation or risk of a portfolio is least when…

Q: a. what is return on each of the three shortlisted stock? and what is the standard deviation of the…

A: Here, Probability of Recession is 70% Probability of Normal is 20% Probability of Boom is 10%

Q: Which of the following statements regarding beta is false: a. Beta is a measure of systematic risk.…

A: Stock's beta analyses its relative risk with respect to market. Beta helps in studying the movement…

Q: Is the following statement correct, wrong or partially correc? Why? "If the volatility of Stock A is…

A: This statement is CORRECT.

Q: In which of the cases is the volatility lower than that of the original stocks? (Select the best…

A: Stock Volatility is the fluctuation in the prices of the stock on either upside or downside.

Q: The interpretation of stock beta coefficient requires an assumption of an average stock which has a…

A: Beta is a measure of a security's systematic risk which cannot be diversified and measures the…

Q: It is said that the key factor that determines the risk of stocks in a large portfolio is not the…

A: portfolio consists of large numbers of securities in portfolio in portfolio return is not related or…

Q: If a stock portfolio is well-diversified, then the portfolio variance   Group of answer choices…

A: A well Diversified portfolio is an balanced portfolio that includes a verity of securities. As the…

Q: The measure of risk for a security held in a diversified portfolio is:a. Specific risk.b. Standard…

A: the standard deviation of returns is the measure of risk which measures the dispersion of variables.…

Q: An individual stock with a beta greater than 1.0 is   a. Same as risky as the market b. Riskier that…

A: The beta of a security measures the riskiness of the stock with respect to the overall market. Since…

Q: Consider the following data.   Stock Standard Deviation Beta X 5% 1.37 Y 8% 0.61   To minimize…

A: Standard deviation shows the total risk of a stock i.e. both systematic and unsystematic risk,…

Q: Investors can use certain metrics to assess a stock or stock portfolio's risk.  One of them is the…

A: Sortino ratio: Sortino ratio is a measure of return of an investment that is adjusted for risk.…

Q: Fundamental analysis is a method of______________________________to determine intrinsic value of the…

A: Fundamental analysis measures a stock's or security's intrinsic value by using various economic or…

Q: hat is the relationship between the expected return of a stock and its fair expected return? When is…

A: Step 1   The anticipated return is the profit or loss that an investor expects from a known…

Q: In an investment market , understanding the concept of undervalued and overvalued stock is very…

A: The graphical representation is shown below:

Q: The "market RISK premium" a) Is the additional market return over the risk-free rate required to…

A: market risk premium: it is the difference between expected return of market and risk free rate.

Q: A stock's beta is more relevant as a measure of risk to an investor who holds only one stock than to…

A: Beta represents the systematic risk and it shows the relationship of the stock with the market.

Q: Which statement is false regarding the Capital Asset Pricing Model?

A: CAPM Return Formula: Expected Return= Rf+ β(Rf- Rm) where,            Rf is Risk free return…

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.