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1. For investors who diversify their fund into portfolio, the riskiness of individual asset: A. should be considered for the asset in isolation B. should
1. For investors who diversify their fund into portfolio, the riskiness of individual asset:A. should be considered for the asset in isolation B. should be considered in the context of the effect on overall portfolio volatility. C. A and B D. None of the above 2. For a two-stock portfolio, the maximum reduction in risk occurs when the correlation coefficient between the two stocks is: A. +1 B. 0 C. -0.5 D. -1 3. Markowitz Portfolio Theory is most accurately described as including an assumption that A. investors have the ability to borrow or lend at the risk-free rate of return B. investment decision-making is based on both risk and return C. investment decision-making is based on both rational and irrational factors D. risk is measured by the range of expected return 4. David is a risk averse investor, Elias is a less risk averse investor than David, therefore A. for the same risk, David requires a higher rate of return than Elias B. for the same return, Elias tolerates lower risk than David C. for the same risk, Elias requires a higher rate of return than David D. for the same return, David tolerates higher risk than Elias
A. should be considered for the asset in isolation
B. should be considered in the context of the effect on overall portfolio volatility.
C. A and B
D. None of the above
2. For a two-stock portfolio, the maximum reduction in risk occurs when the correlation coefficient between the two stocks is:
A. +1
B. 0
C. -0.5
D. -1
3. Markowitz Portfolio Theory is most accurately described as including an assumption that
A. investors have the ability to borrow or lend at the risk-free rate of return
B. investment decision-making is based on both risk and return
C. investment decision-making is based on both rational and irrational factors
D. risk is measured by the range of expected return
4. David is a risk averse investor, Elias is a less risk averse investor than David, therefore
A. for the same risk, David requires a higher rate of return than Elias
B. for the same return, Elias tolerates lower risk than David
C. for the same risk, Elias requires a higher rate of return than David
D. for the same return, David tolerates higher risk than Elias
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