hen constructing a portfolio, an investor should only choose securities which are Q14. Group of answer choices 1. negatively correlated. 2. not correlated. 3. not perfectly positively correlated. 4. All of the above
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When constructing a portfolio, an investor should only choose securities which are
1. negatively correlated.
4. All of the above
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- Suppose you are an average risk-averse investor who can purchase only one of the following stocks. Which should you purchased? Explain your reasoning. Investment Expected Return, r Standard Deviation, (r Stock M 6.0% 4.0% Stock N 18.0 12.0 Stock O 12.0 7.0An investor wishes to contruct a portfolio consisting of security 1 and security 2. the expected return on the two securities are E(R1) = 0.08 And E(R2) = 0.12 and the standard deviation 1 = 0.04 and Standard deviation 2 = 0.06. the correlation coefficient between thier returns is P1,2 = -0.5. Investor is free to choose the investment proportions W1 And W2 only to requirment that w1+w2=1 and both w1 and w2 are positive.There is no limit to the number of portfolios that meet thses requirements, since there is no limit to the number of proportions that sum to 1. Therefore a representative selection of values is considered w1: 0, 0.2, 0.4, 0.6, 0.8, and 1Q1) The covariance between stocks A and B is 0.0014, standard deviation of stock A is 0.032, and standard deviation of stock B is 0.044. Which of the following is the most appropriate to depict the risk-return characteristics of a portfolio consisting of only stocks A and B, and explain why? (Image attached as Q)
- The expected returns for stocks A, B, C, D, and E are 7 %, 10%, 12%, 25%, and 18% respectively. The corresponding standard deviations for these stocks are 12%, 18%, 15%, 23%, and 15% respectively. Based on their coefficients of variation, which of the securities is least risky for an investor? Assume all investors are risk-averse and the investments will be in isolation.Choices:a. Ab. Bc. Cd. De. EAn investor is trying to decide between Portfolio ST and Portfolio BT. Portfolio ST comprises of stocksfrom the tech, financial and construction industry, while Portfolio BT includes stock from tech and financial industries only. The table below contains information on both portfolios. Which portfolio is the optimal portfolio considering the threshold level? Why do you think portfolio BT has a higher standard deviation than portfolio ST?Given the information in the table below, which of the following statements is correct, assuming that either security will be held in a portfolio with other investments? Stock Expected Return Required Return Beta Standard Deviation A 10% 12% 0.9 25% B 8% 5% 0.3 35% Question 26 options: The investor should purchase both stocks because their beta is less than that of the market. The investor should purchase A since its risk, as measured by standard deviation, is the lowest. The investor should purchase A because it requires the highest rate of return. The investor should purchase B since its expected return exceeds its required return.
- a. Using the data provided in problem 3, determine the return and risk for a portfolio made up of the following three stocks if you want to distribute your investment as follows: 20% in ADRE; 65% in MSFT and 15% in GOOG.b. How would the portfolio be affected if you distributed your investment in the following way: 30% in ADRE; 25% on MSFT and 45% on GOOG?c. Which of the two portfolios would a risk seeking investor prefer and why?ich of the following will not reduce risk in a portfolio? Select one: a. Selecting two securities that are perfectly positively correlated. b. Selecting two securities that are positively correlated. c. Selecting two securities that are perfectly negatively correlated. d. Selecting two securities that are negatively correlated.Which of the following portfolios should a risk averse investor choose? Portfolio Name σ(rP) Sharpe Ratio A 20% 0.45 B 25% 0.36 C 10% 0.27 D 15% 0.14 Portfolio D Portfolio A Portfolio C Portfolio B
- Find risk free rate and expected return of market portfolio based on the following information - Company A stock - expected return = 14%, beta = 1.2 Company B stock - expected return = 20%, beta = 2.4 Alphas of both stocks are 0, and there is no abnormal return. Find risk free rate and expected return of market portfolio. Use two equations.Consider following information on a risky portfolio, risk-free asset and the market index. What is the T2 of the risky portfolio? Risky portfolio Risk-free asset Market index Average return 8.2% 2% 6% Std. Dev. 26% 20% Residual std. dev. 10% Alpha 1.4% Beta 1.2Consider a T-bill with a rate of return of 6% and the following risky securities: Security A: E(r) = 9%; Standard Deviation = 9% Security B: E(r) = 10%; Standard Deviation = 11% security C: E(r)= 16%; Standard Deviation = 20% Security D: E(r) = 18%; Standard Deviation = 26% From which set of portfolios, formed with the T-bill and any one of the four risky securities, woulda risk-averse investor always choose his portfolio? Select one: A. The set of portfolios formed with the T-bill and security D. B.The set of portfolios formed with the T-bill and security A. oC. The set of portfolios formed with the T-bill and security B. D. The set of portfolios formed with the T-bill and security c. E. Cannot be determined.