Question

Mark all the correct statements.

When two assets are not correlated, it is possible to create a portfolio with them that will have zero standard deviation. |
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When two assets' correlation is +1, the minimum variance portfolio (allowing no short selling) consists of 100% from the asset with the lesser variance. |
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Even very risk averse investors prefer the Optimum Risky Portfolio to the Minimum Variance Portfolio. |
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Given a 50-50% investment into two predetermined risky assets, the lower their correlation, the lower the Sharpe ratio of their portfolio. |

Answer #1

Correct statements are as follows-

B)When two assets' correlation is +1, the minimum variance portfolio consists of 100% from the asset with the lesser variance. This is a reflection of the perfectly positive correlation and this will be offering no diversification.

C)even the risk averse investor will prefer the optimum risky portfolio because these portfolios are based on the principle of minimization of disc and maximization of the determinant they will prefer this portfolio against minimum variance portfolio.

(i)
The expected returns on two distinct
risky assets A and B are correlated and a portfolio consisting of A
and B has zero variance of expected return. What can be said about
the correlation between the expected returns of risky assets A and
B?
(ii)
An investor constructs an efficient
portfolio that invests 150% of his investment in the tangent
portfolio of risky asset and is short in the risky free asset for
the rest. What can be said...

Which of the following statements regarding a portfolio of two
risky assets (with almost equal weights) is true?
A.
For this portfolio, if investors do not invest in a risk-free
asset, the feasible set simply includes the upward curve starting
from the global minimum variance portfolio.
B.
A portfolio without a risk-free asset cannot earn a higher
return than a portfolio with risk-free assets if these two
portfolios have the same risk.
C.
If investors invest in a risk-free asset,...

Which of the following statements about a portfolio is(are)
correct A portfolio of two assets with perfectly positively
correlated returns will have an overall risk below that of the
least risky asset B. A portfolio of two assets with perfectly
negatively correlated

Assume two risky assets A and B with correlation ρ=-1.00.Their
respective returns and volatilities are,
Asset
Expected Return (%)
Volatility
A
7.00
0.0010
B
5.00
0.0005
Compute the return and volatility of the minimum-variance
portfolio.
Select one:
a. Return: 5.67%; volatility: 0.0%
b. No answer
c. Return: 7.12%; volatility: 0.0%.
d. Return: 7.12%; volatility: 3.21%.
e. Return: 5.67%; volatility: 3.21%.

1.‘The rate of return is more appropriate for comparing the
profitability of financial assets than absolute dollar profit.’ Do
you agree with this statement?Explain.
2.‘The rate of return is the most important outcome for an
investment.’ Do you agree with this statement?Explain.
3.Explain how the expected rate of return and the risk of an
individual asset are measured.
4.Explain how the expected rate of returnand the variance of a
portfolio are calculated.
5.Explain what ‘covariance’ means.
6.Explain how the number...

Which of the following is FALSE?
Select one:
a. A portfolio combining two assets with less than perfectly
positive correlation can reduce total risk to a level below that of
either of the components.
b. A firm has high sales when the economy is expanding and low
sales during a recession. This firm's overall risk will be higher
if it invests in another product which is counter cyclical.
c. A portfolio that combines two assets having perfectly positively
correlated returns...

QUESTION 21
One implication of the tradeoff theories of capital structure
decision is that firms that are likely to pay taxes at high rates
should carry more debt than firms in lower tax brackets.
True
False
1.00000 points
QUESTION 22
One implication of the tradeoff theories of capital structure
decision is that risky firms, as measures by the variability of
asset returns, ought to borrow more, other things equal.
True
False
1.00000 points
QUESTION 23
The pecking order...

1. The internal rate of return identifies:
A. the minimum acceptable discount rate.
B. the cost-benefit ratio.
C. the average profit from a project.
D. none of the given answers.
2. The net present value rule states that you
should accept a project if the NPV:
A. is equal to zero or negative.
B. exceeds the required rate.
C. is less than 1.0.
D. is positive.
3. A net present value of zero implies that an
investment:
A. has an...

Can I have your opinion on this research and possible
correction?
The global economy and government’s ability to control its
country’s currency.
Definition of terms
Global economy is an economic interdependence established
between the most influential countries that drives the worldwide
economic environment. It is also the aggregate economic output,
movement and influence of all countries. (My Accounting
course).
Currency is the medium of exchange for goods and
services. In short, its money, in the form of paper or coins,...

"Risk' can be best defined as on the of the
followings:
a. Variability of returns and probability of financial loss
b. Chance of financial loss
c. Variability of returns
d. Correlation of relationship among two variables
Which of the following statement is NOT TRUE when we argue that
the idea of riskless arbitrage is to accumulate the portfolio with
following conditions :
a. Requires no net wealth invested initially
b. Invest in the long-term securities only where risk will be...

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