According to modern portfolio theory, the idea that investors with different indifference curves will hold the same portfolio of risky securities is a result of: (a) diminishing marginal utility of income (b) covariance (c) the separation theorem (d) the normal distribution assumption Within the framework of modern portfolio theory, if portfolios A and B have the same return but portfolio A has less risk, then: (a) portfolio B is inefficient (b) portfolio A is inefficient (c) portfolio B cannot exist
Words: 3286 - Pages: 14
asset be 0.25, and the investor holds an equally weighted portfolio of these assets. How many of such assets should an investor hold so that the variance of her portfolio is zero? (b) If the correlation was 0.02 can the investor ever achieve a zero variance? (c) For the case that the correlation is 0.4, and the investor holds an equally weighted portfolio of 10 assets, calculate the amount of unsystematic and systematic risk in her portfolio. 2. (Diversification over time). Suppose an investor invests
Words: 498 - Pages: 2
and 1.2 % respectively a. 18 %, 14.4% b. 15%, 14.4% c. 15%, 4.16% d. 18 %, 4.16% 4. Efficient frontier is the plot of efficient portfolios by combining risky assets and risk free assets a. True b. False 5. The portfolio on efficient frontier which has least risk is a. Market Portfolio b. Efficient Portfolio c. Minimum Variance Portfolio d. None 6. Risk that cannot be diversified is a. Systematic Risk b. Non Diversifiable Risk c. Market Risk d. All the
Words: 537 - Pages: 3
lie on the SML (not below or above the SML as overpriced or underpriced securities, respectively). b) Other things equal, diversification is most effective when securities' returns are uncorrelated. (1 point) FALSE: The greatest reduction of portfolio risk (=the goal of diversification) results from negative correlation among securities. Financial Management Mid-Term exam, 13/10/2012 1 c) Relative to European puts, otherwise identical American put options are less valuable. (1 point) FALSE:
Words: 752 - Pages: 4
Report. Dear Sir, Here is the report on “Personal Portfolio Management”. I shall be pleased to thank you for assigning me such an interesting topic. While dealing with the topic, I have gone through different books on portfolio management, local and international research papers, national dailies, annual reports, stock market websites and other world wide webs. It is a great pleasure for me that I have got a practical orientation with portfolio management and the relevant finance theories. Though
Words: 643 - Pages: 3
Case Study 1 NPV: Of all the investment appraisal methods, NPV is often argued to be the most superior. This is because it takes into account the time value of money. The method assumes that a dollar today is worth more than a dollar this time next year. It works under the assumption that if one is owed a dollar and the borrower offers a choice of either giving the dollar now or in a year’s time, the more rational option for the lender is to take the dollar now. Provided the lender does not keep
Words: 2684 - Pages: 11
Assignment: Understanding the Concepts FIN 100 – Principles of Finance Assignment: Understanding the Concepts Ever dream of owning your own business? The life of a business owner can be a glorious one with many exciting benefits such as a big house, a nice car, and oodles of money. According to (Henderson, 2012), “The average income of small business owners varies widely depending upon their level of experience. For example, small business owners with less than one year of experience in running
Words: 2989 - Pages: 12
manufacturer for over 30 years and had taken full advantage of the company’s voluntary retirement savings plan. However, instead of buying a diversified set of investment he had invested his money into a few high growth companies. Over time his investment portfolio had growth to about $900,000 being primarily comprised of the stocks of 3 companies. He was very fortunate that his selections turned out to be good ones and after numerous stock-splits the prices of the three companies had appreciated significantly
Words: 940 - Pages: 4
Part I Portfolio Theory 1. Introduction Before discussing the portfolio, it is important to make sure the following concepts are understood: E¢cient Portfolios: That is when investors seek to maximize the expected return from their investment given some level of risk they are willing to accept. Risk Aversion: Individuals according to those theories are assumed to be risk averse: is one who, when faced with two investments with the same expected return but two di¤erent risks, will prefer the
Words: 8403 - Pages: 34
Portfolio Project Reflection As I undertook to study this course, I was apprehensive and worried about Part 4 concerning the project portfolio. At first I had the perception that common diagnostic coding auditing processes are complicated to understand and to use in the medical profession.Until I begin handling part 4 of this project; it is when I realized that medical coding system is a process of assigning numeral values to medical procedures and diagnoses. It is when that I developed
Words: 281 - Pages: 2
