In general, the the correlation between asset returns, the the risk reduction that investors can achieve by diversifying. O a. lower; lower b. greater; greater O c. lower; greater d. greater; lower
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- What does Jensen's alpha measure? a. An investor's reward in proportion to their assumption of systematic risk b. The abnormal return of an asset, defined as the degree to which its actual return exceeds that predicted by the capital asset pricing model c. The degree to which diversifiable risk is eliminated d. How much reward an investor is getting for each unit of risk assumedFinance 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.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 correlated
- Which of the following statements describing the elements of intrinsic valuation is most accurate? a. A simple calculation of present values of expected cashflows of different investments using the risk free rate would be enough to determine which asset is best. b. The risk-free rate is the lowest rate that an investor can earn from short-term investments.c. When the present value of the cashflows is discounted with the appropriate rate end this present value is positive, then the asset providing these cashflows have a value to the investor. d.Cashflows may include depreciatipon expenses and amortization costs.When adding a risky asset to a portfolio of may risky assets, which property of the asset has a greater influence on risk: its standard deviation or its covariance with other assets? ExplainWhich of the following statements describing the elements of intrinsic valuation is most accurate? A.) When the present value of the cashflows is discounted with the appropriate rate and this present value is positive, then the asset providing these cashflows has a value to the investor. B.) The risk-free rate is the lowest rate that an investor can earn from short-term investments. C.) Cashflows may include depreciation expenses and amortization costs. D.) A simple calculation of present values of expected cashflows of different investments using the risk free rate would be enough to determine which asset is best.
- Whenever you make an investment decision, you need to consider its impacts on the diversification of your portfolio and the allocation of your assets. a. false b. depends c. maybe d. trueDiversification refers to the _________.a. reduction of the stand-alone risk of an individual investment, measured by its beta coefficient, by combining it with other investments in a portfolio b. reduction of the stand-alone risk of an individual investment, measured by the standard deviation of its returns, by combining it with other investments in a portfolio c. reduction of systematic risk of an individual, measured by its beta coefficient, by combining it with other investments in a portfolio d. reduction of systematic risk of an individual, measured by the standard deviation of its returns, by combining it with other investments in a portfolio e. reduction of the unsystematic risk of an individual, measured by its coefficient of variation, by combining it with other investments in a portfolioThe Capital Asset Pricing Model (CAPM) asserts that an asset’s expected return is equal to the risk-free rate plus a risk premium for: a. Volatility b. Systematic risk c. Non-systematic risk d. Diversification e. Marginal utility of consumption
- Which of the following is true of risk-return trade off? A) Risk can be measured on the basis of variability of return. B) Risk and return are inversely proportional to each other. C) T-bills are more riskier than equity due to imbalances in government policies. D) Riskier investments tend to have lower returns.Indicate whether its True or False. Then write the explanation! In the presence of diversification benefits, when we combine two assets together into a portfolio, the systematic risk of the portfolio will be less than the weighted average systematic risk of the individual assets in the portfolio.Benefits of diversification. What is the expected return of investing in asset M alone?
