Portfolio diversification is the cornerstone of reducing risk in a portfolio. How would you use the Excel spreadsheet to quantify and reduce the risk in your risky asset investment portfolio?
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Portfolio diversification is the cornerstone of reducing risk in a portfolio. How would you use the Excel spreadsheet to quantify and reduce the risk in your risky asset investment portfolio?
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- Write out the equation for the Capital Market Line (CML), and draw it on the graph. Interpret the plotted CML. Now add a set of indifference curves and illustrate how an investors optimal portfolio is some combination of the risky portfolio and the risk-free asset. What is the composition of the risky portfolio?An investor’s first step of investing in the financial markets is to establish an investment objective aligned with his or her long-term financial goals and needs. The critical part of the investment process is to earn the maximum return possible while minimizing risk. Portfolio diversification is the cornerstone of reducing risk in a portfolio. How would you use the Excel spreadsheet to quantify and reduce the risk in your risky asset investment portfolio?How would you use the Excel spreadsheet to quantify and reduce the risk in your risky asset investment portfolio?
- Explain the unique risk and the market risk. What risk can be reduced when you diversify your portfolio by investing across many different assets?What is the expected return on a portfolio? How can the expected return on a portfolio be manipulated to minimize the risk on that portfolio? Justify your answer.How to construct Portfolio of different risk levels, given information about the risk-free rate and the returns on risky assets? What is a systematicrisk? How can we diversify risk efficiency?
- If you introduce a risk free asset in your portfolio of risky assets; how will this change the shape of the opportunity? What are the main implications with respect to portfolio theory?Portfolio management requires the knowledge of knowing the correct combination of stocks, bonds, cash, or alternative investments. With this is mind, how does ‘diversification reduce risk’. Make sure you include details on what portfolio management is.Portfolio optimization is the “holy grail” of investing. All investors are seeking the optimal portfolio that will maximize returns while minimizing risks. The Excel spreadsheet is the “optimizer” for the average investor. What are the primary benefits of using Excel portfolio optimization analysis? How would you optimize your portfolio using Excel?
- what 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.What is an optimal risky portfolio? Discuss the process of creating an optimal portfolio of risky assets. If you are trying to create an optimal portfolio, how do you select the risky assets to include in the portfolio?Familiarity with random variables is essential to understand the basics of portfolio theory. It is about portfolio formation, you need to strengthen your skills in dealing with random variables. Please review and explain the significance of basic concepts about random variables, namely, the mean, the variance, the standard deviation, and the correlation.
