Question
1. Calculate the required rate of return for the Samsung stock. 2. Please elaborate deeper on this: If t he objective is to minimize risk
1. Calculate the required rate of return for the Samsung stock.
2. Please elaborate deeper on this: If the objective is to minimize risk and build a well diversified portfolio, the securities should have negative correlation. The correlation should be negative. A correlation coefficient of -.70 to -.99 can be said strong and negative. A correlation coefficient of -.40 to -.69 can be said negative and moderate while a correlation coefficient of -.10 to -.39 can be said negative and weak. A strong and negative correlation between market and a particular stock would mean that an increase in the market is likely to lead to a decrease in the stock. While a weak and negative correlation would mean that an increase in the market may not necessary lead toa decrease in the stock.
3. please elaborate more on this: While we know that negative correlation reduces risk, this does not necessary mean that every investor is likely to seek for securities that are negatively correlated. Risk-averse investors are likely to search for securities that are negatively correlated by holding stocks with positive beta and stock with negative beta or stock with high beta and stock with low beta in the portfolio.But arisk-taker (aggressive) investors may be attracted to securities that are positively correlated for search for higher returns by holding mostly stocks with high beta. It all depends on every investor tolerance of risk.
Answers don't have to be more than five sentences if sufficient. 100% Original work only, thank you.
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