(Security market line) Your father just learned from his financial advisor that his retirement portfolio has a beta of 1.81. He has turned to you to explain to him what this means. Specifically, describe what you would expect to happen to the value of his retirement fund if the following were to occur: a. The value of the market portfolio rises by 6 percent. b. The value of the market portfolio drops by 6 percent. c. Is your father's retirement portfolio more or less risky than the market portfolio? Explain. Question content area bottom Part 1 a. If the value of the market portfolio rises by 6%, then the value of your father's retirement fund should ▼ increase decrease by enter your response here%. (Select from the drop-down menu and round the answer to two decimal places.) Part 2 b. If the value of the market portfolio drops by 6%, then the value of your father's retirement fund should ▼ increase decrease by enter your response here%. (Select from the drop-down menu and round the answer to two decimal places.) Part 3 c. Your father's retirement portfolio is ▼ less more risky than the market portfolio because your father's retirement portfolio beta, it's systematic risk, is ▼ greater less than the market's portfolio beta. (Select from the drop-down menus.)
(Security market line) Your father just learned from his financial advisor that his retirement portfolio has a beta of 1.81. He has turned to you to explain to him what this means. Specifically, describe what you would expect to happen to the value of his retirement fund if the following were to occur: a. The value of the market portfolio rises by 6 percent. b. The value of the market portfolio drops by 6 percent. c. Is your father's retirement portfolio more or less risky than the market portfolio? Explain. Question content area bottom Part 1 a. If the value of the market portfolio rises by 6%, then the value of your father's retirement fund should ▼ increase decrease by enter your response here%. (Select from the drop-down menu and round the answer to two decimal places.) Part 2 b. If the value of the market portfolio drops by 6%, then the value of your father's retirement fund should ▼ increase decrease by enter your response here%. (Select from the drop-down menu and round the answer to two decimal places.) Part 3 c. Your father's retirement portfolio is ▼ less more risky than the market portfolio because your father's retirement portfolio beta, it's systematic risk, is ▼ greater less than the market's portfolio beta. (Select from the drop-down menus.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
(Security market line) Your father just learned from his financial advisor that his retirement portfolio has a beta of
1.81.
He has turned to you to explain to him what this means. Specifically, describe what you would expect to happen to the value of his retirement fund if the following were to occur:a. The value of the market portfolio rises by
6
percent.
b. The value of the market portfolio drops by
6
percent.c. Is your father's retirement portfolio more or less risky than the market portfolio? Explain.
Question content area bottom
Part 1
a. If the value of the market portfolio rises by
by
6%,
then the value of your father's retirement fund should
▼
increase
decrease
enter your response here%.
(Select from the drop-down menu and round the answer to two decimal places.)Part 2
b. If the value of the market portfolio drops by
by
6%,
then the value of your father's retirement fund should
▼
increase
decrease
enter your response here%.
(Select from the drop-down menu and round the answer to two decimal places.)Part 3
c. Your father's retirement portfolio is
risky than the market portfolio because your father's retirement portfolio beta, it's systematic risk, is
than the market's portfolio beta. (Select from the drop-down menus.)
▼
less
more
▼
greater
less
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