understand the importance of weighting securities in a portfolio?

Q: How can derivative security be used to hedge portfolio risk?

A: A derivative is depicted as an investment procedure outlined to assist the financial specialist to…

Q: Describe how a risk-free portfolio can be created using stocks and options. How cansuch a portfolio…

A: Risk-free portfolio can be created by purchasing stock of the company and buying the put option on…

Q: Example or scenario of market portfolio?

A: The question is based on the concept of market portfolio, which  is a bundle of  all the assets…

Q: Portfolio management requires the knowledge of knowing the correct combination of stocks, bonds,…

A: Portfolio management is the selection, prioritisation and control of an organisation's programmes…

Q: How does an efficient portfolio relate to a feasible portfolio?

A: PortfolioSets of assets are termed as a portfolio. A portfolio comprises the number of bonds,…

Q: Briefly explain on elements of Modern Portfolio Theory.

A: Modern portfolio theory brings correlation between risk and return for investors.

Q: Which are the most efficient combination of securities that provides investors with maximum…

A: The efficient frontier is a set of optimal portfolios that provide the greatest expected return for…

Q: What are the benefits and advantages of diversification for a portfolio?

A: Diversification of portfolio means allocating investments to different assets so that there is…

Q: Describe how a risk-free hedge portfolio can be created using stocks and options.

A: A risk-free hedge portfolio can be created by the usage of stocks and options by the following…

Q: Compare long-term instruments and short-term risks, in terms of the various types of risk to which…

A: Interest rate risk is the likelihood that the value of a fixed-rate debt instrument may fall when…

Q: Which are the Elements of Portfolio Theory?

A: Portfolio theory: The theory of portfolio is about risk and return. The investor is concerned…

Q: What is risk aversion, and how is risk aversion related to the expected return on a stock

A: In the world of investment, the risk appetite of the investor is an important consideration when…

Q: Define the real risk-free rate (r*). What security canbe used as an estimate of r*? What is the…

A: Answer: Real risk-free return: Real risk-free return is nothing but a minimum rate of return…

Q: What is hedge portfolio?

A: Hedge portfolio It consists of the long position in a security i.e stock and also the long position…

Q: The less correiated the securities in a portfolio,

A: The correlation of the securities in the portfolio represents the price relation of the different…

Q: What is relationship between the market risk of a stock and it's expected return?

A: Expected return is directly related to the market risk . Market risk is represented by beta. Higher…

Q: Cakulate the expected retun and risk of a portfolio

A: Portfolio Risk: Portfolio risk is the measurement of variance between the assets and the targeted…

Q: 1) Should portfolio effects influence how investors think about the risk of individual stocks?

A: The impact of portfolio on the thinking of the investors: Portfolio diversification usually has…

Q: How does the diversification of an investor’s portfolio avoid risk?

A: Portfolio investments mean investments in the group of assets, securities, bonds, etc. Investments…

Q: Refined measures of performance are commonly used to evaluate portfolio performance. a. Define and…

A: The portfolio refers to the combination of different types of securities for investment. The…

Q: What is the relationship between the efficient portfolio and the feasible portfolio?

A: An efficient portfolio can be defined as portfolio which maximizes return for given level of risk or…

Q: Describe how a risk-free hedge portfolio can be created usingstocks and options

A: Hedging: The transaction that deceases the risk of the firm that can take place due to fluctuations…

Q: Explain the Use of Derivatives to Hedge Portfolio Risk?

A: The contract whose value derives from the fluctuation of values of the underlying assets is called…

Q: How do forwards, futures, and swaps hedge risk?

A: A forward contract may be a personalized contract between 2 parties purchasing or offering an asset…

Q: determine the expected return for securities

A: Return on security is the difference in Value at the time of maturity and cost of investment. T-Bill…

Q: Calculate Portfolio Returns with example?

A: The determination of profit or loss on the investment in a portfolio is called portfolio return. The…

Q: Discuss the portfolio risk for stock investment.

A: Stock is the unit of capital or equity of an organization that is issued by the organization in the…

Q: Discuss the role of risk-free assets in the Markowitz Portfolio Theory.

A: Harry Markowitz always focused on lowering the risk and diversification in order to maximize the…

Q: Why are covariance and correlation concepts so important in portfolio analysis?

A: In portfolio theory covariance is important since the portfolio variance is a mixture of individual…

Q: Explain risks in Portfolio?

A: Introduction: Risk is nothing but a potential for emergence of unexpected occurrences. There is…

Q: Describe how a risk free hedge portfolio can be created using stock and options.

A: Introduction: Hedging is one type of strategy in the risk management system. It is a strategy…

Q: What is equity risk premium?

A: The risk premium is the extra return an investor receives for taking market risk. We know that risk…

Q: Define Arbitrage (risk-free) portfolio

A: An arbitrage portfolio is a portfolio with zero factor risk - all the factor sensitivities are equal…

Q: Immunization is intended to protect a portfolio against interest rate risk. What should be done? How…

A: Immunization is the strategy under which the checks on the interest rates are provided to the firms.…

Q: The security market line depicts:a. A security’s expected return as a function of its systematic…

A: The relationship between assets expected return of individual security with that of risk involved in…

Q: Which statement about portfolio diversification is correct?

A: A portfolio is a combination of more than a stock or security. It is said to be diversified when the…

Q: Explain portfolio risk

A: Portfolio risk reflects the overall risk for a portfolio of investments. It is the combined risk of…