Question

7. Diversification and risk The following graph plots the relationship between risk, calculated as the standard deviation of the return of a stock portfolio, and the number of different stocks the portfolio contains for some imaginary stock market. a0 E T B 2 + 3 = g 40 g o 5 + 5 :\\ = s I T T + 5 1 I : 5 1 1 1 1 @ 1 1 1 1 5 o I I T g I I I I i 4 10 20 a0 40 NUMBER OF STOCKS IN PORTFOLIO True or False: Increasing the number of stocks in a portfolio reduces market risk. O True O False Consider two stock portfolios. Portfolio B consists of 20 different stocks from firms in different industries. Portfolio A consists of four different stocks, also from firms in different industries. The return on Portfolio B is likely to be _ volatile than that of Portfolio A. Suppose a stock analyst recommends buying stock in the following companies: Company Industry Jackson & Jackson Pharmaceutical Fizzer Pharmaceutical Bazer Pharmaceutical Walreds Pharmaceutical Citron Technology Zahoo Technology Athena Apparel Edides Apparel Generic Motors Automotive Horizon Telecommunications Each of the following portfolios contains stock picks from four of the listed companies. Which of the portfolios is the least diversified? O Jackson & Jackson, Walreds, Edides, Athena O Jackson & Jackson, Fizzer, Bazer, Walreds O Edides, Athena, Citron, Zahoo O Horizon, Athena, Generic Motors, Citron Grade It Now Save & Continue1. Measuring employment, unemployment, and labor force participation Consider a tiny hypothetical economy composed entirely of the following people: Pacle, Sharon, Van, Amy, Deborah, and Carlos. Each person's employment status is given in the following table. Based on the criteris used by the Bureau of Labor Statistics (BLS), identify each person's status as employed, unemployed, "not in the labor force\" (if not in the civilian labor force but still part of the adult population), or "not in the adult population\" if not in the civilian adult population. Person Status Paolo is a 71-year-old professor. He teaches only one or two courses a year, but still v publishes research at a productive rate. Sharon is a 32-year-old professional hockey player v . She finished her last season as a player 3 weeks ago and is currently interviewing for a coaching position. Van is a 47-year-old accountant who has been out of work for almost a year. He became v so discouraged that he gave up on his job search a couple of months ago. Deborah is a 31-year-old science teacher who taught at River Rock Middle School last v year. Due to budget cuts, she was laid off at the end of the school year. It's the summer now, and after a few weeks of vacation with her family, she is looking for a part-time job as a tutor. Carlos is a 20-year-old American Studies major at the University of Alabama. It's summer v now, and he is working as a lifeguard in Memphis, Tennessee. Amy is a 13-year-old student at Moutain River Middle School. She babysits her younger v siblings and does other chores, so her parents give her an allowance of $25 per week. Complete the right haif of the following equation to reflect the labor force participation rate reported by the BLS. Labor Force Participation Rate = - According to this formula, what is the labor force participation rate of this economy of six people? 0 a0% ) s0% 0 80% ) 100% Complete the right half of the following equation to reflect the unemployment rate reported by the BLS. Unemployment Rate = - According to this formula, what is the unemployment rate of this economy of six people? ) 100% Grade It Now