Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help!! from left to right the other three dots plotted are (16,20) (60,14) & (120,11) 9. Effects of portfolio size on portfolio risk The

please help!!
from left to right the other three dots plotted are (16,20) (60,14) & (120,11)
image text in transcribed
image text in transcribed
9. Effects of portfolio size on portfolio risk The following graph plots portfolio risk against the size of the portfolio as measured by the number of stocks in the portfolio. (Hint: Hover the mouse over the graph to read the coordinates.) ? 150, 10 0 15 30 45 00 75 00 105 120 135 150 NUMBER OF STOCK IN THE PORTFOLIO 84 20 G PORTFOLIO RISK 10 5 Based on the data presented in the previous graph, which of the following statements are true? Check all that apply. All stocks are equally risky, and adding them to a portfolio will increase the portfolio's risk. As the portfolio size increases, its market risk remains constant. Diversifiable risk lies below a = 10%. The risk of a portfolio consisting of large-company stocks approaches a limit of 10%. A portfolio of 60 stocks has a total risk of 14%. The benchmark for a well-diversified stock portfolio is the market portfolio, which is a portfolio containing all stocks. The relevant risk of an individual stock is measured by its beta coefficient, which is defined under the Capital Asset Pricing Model (CAPM) as the amount of risk that the stock contributes to the well-diversified portfolio. Based on your understanding of the CAPM and beta, answer the following question: Which of the following statements about stock's correlation with the market is true? OA stock with a high correlation with the market is risky. OA stock with a low correlation with the market is risky. A stock with low stand-alone risk will tend to destabilize the portfolio

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Performance Measurement In Finance

Authors: John Knight, Stephen Satchell, Nathalie Farah

1st Edition

0750650265, 978-0750650267

More Books

Students also viewed these Finance questions