Asset allocation is not recommended by financial planners because mixing different types of assets, such as stocks with bonds, makes it more difficult to track performance and adjust portfolios to changing market conditions. Select one: True False
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Asset allocation is not recommended by financial planners because mixing different types of assets, such as stocks with bonds, makes it more difficult to track performance and adjust portfolios to changing market conditions.
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- Which of the following is TRUE about liquidity? a. All assets should be put in liquid asset so that it is easy to use when necessary b. In most of the cases, the more liquid asset provides the lower return c. Investors should not care about liquidity in order to have a balanced portfolio investment d. Liquidity requirement does not have any impact on the return.Select all that are true. The risk-return tradeoff is generally worse for individual assets than for portfolios because Group of answer choices combining assets into portfolios reduces risk without reducing expected returns by combining assets into portfolios, one can hold risk constant and get a higher expected return by combining assets into portfolios, one can hold expected return constant and reduce risk by combining assets into portfolios, one eliminates risk and still has a positive expected returnwhat are the challenges faced by an investment advisor in managing investor expectations in volatile market conditions? Additionally, can you validate the statement: According to Harry Markowitz, the risk of well-diversified portfolio is less than the risk of the candidate used in the portfolio.
- In order to benefit from diversification, the returns on assets in a portfolio must: Answer a. Not be perfectly positively correlated b. Have the same idiosyncratic risks c. Be perfectly positively correlated d. Be perfectly negatively correlatedWhich of the following is false about diversification? Select one or more: a. diversification only works when returns on investments move in different ways b. diversification results in higher Sharpe ratios c. diversification reduces risk d. diversification eliminates riskMarket timers focus onusing overall market trends as a basis for predicting when to buy or sell investments. However, they can use valuation techniques on specific financial instruments to support their decision. True or false?
- Finance Combining two assets having perfectly negatively correlated returns will result in the creation of a portfolio with an overall risk that: Group of answer choices decreases to a level below that of either asset. remains unchanged. increases to a level above that of either asset. stabilises to a level between the asset with the higher risk and the asset with the lower risk.When comparing NPV and IRR, which is incorrect? With NPV, the discount rate can be adjusted to take into account increased risk and the uncertainty of cash flows With IRR, cash flows can be adjusted to account for risk NPV can be used to compare investments of various size or magnitude Both NPV and IRR can be used for screening decisionsSuppose the financial institution is trying to minimise their exposure to changes in the underlying asset price. Explain why the financial institution may want to keep their portfolio both Delta and Gamma neutral
- Explain Portfolio analysis does, however, have some very real limitations that have caused some companiesto reduce their use of this approach: 1.It suggests the use of standard strategies that can miss opportunities or be impractical.Capital Asset Pricing Model is based on certain assumptions, which have been criticized after empirical testing of the model. Discuss the critique of the model in the context of those assumption. Also discuss the empirical findings of the CAPM. What sort of models have been presented to overcome the drawbacks of CAPM?Why does the limitation of Portfolio analysis is It suggests the use of standard strategies that can miss opportunities or be impractical?Give examples.