Question
Suppose the beta of your well-diversified portfolio is 0.5. Which of the following is correct when you add a stock with a beta of 2.0
Suppose the beta of your well-diversified portfolio is 0.5. Which of the following is correct when you add a stock with a beta of 2.0 to your portfolio?
Group of answer choices
The beta of the stock you add to your portfolio will decrease.
There will be no effect on your portfolio's risk if it is well-diversified.
Your portfolio will become less risky.
Your portfolio will become more risky.
2.
A 10-year, 7 percent coupon bond has a yield to maturity of 9 percent. Its par value is $1000. Which of the following must be correct?
Group of answer choices
The bond's price is expected to stay the same.
The bond sells at a premium, and its price is expected to increase over time.
The bond sells at a discount, and its price is expected to increase over time.
The bond sells at a discount, and its price is expected to decrease over time.
The bond sells at a premium, and its price is expected to decrease over time.
3.
When interest rates rise unexpectedly, the realized rate of return is lower than the expected yield (YTM), because
Group of answer choices
although the bonds current yield is unchanged, its capital gain is lower than expected.
although the bonds capital gain is unchanged, its current yield is lower than expected.
both the bonds capital gain and current yield are higher than expected.
although the bonds capital gain is unchanged, its current yield is higher than expected.
although the bonds current yield is unchanged, its capital gain is higher than expected.
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