What is a risky portion of return?
It is the return that is classified as risky by bond rating agencies. It is the portion of return that depends on information that is currently unknown. It is the portion of return that depends on information that is currently unknown.
How does the number of securities in a portfolio affect returns?
Historical return data indicates that as the number of securities in a portfolio increases, the standard deviation of returns for the portfolio: declines Systematic risk will _______ when securities are added to a portfolio. not charge True or False: A well-diversified portfolio will eliminate all risks. False
What are two components of risky return in the equation?
What are two components of risky return in the total return equation? Market risk & unsystematic risk Which of the following are examples of unsystematic risk? -labor strikes -the expected rate of inflation next year -changes in management -changes in federal tax code -labor strikes -changes in management
What are the two components of expected return on the market?
What are the two components of the expected return on the market (Rm)? Assets A and B each have an expected return of 10 percent. Asset A has a standard deviation of 12 percent while Asset B has a standard deviation of 12 percent. Which asset would a rational investor choose?
What is the portion of return that is unaffected by present or future information?
Why is the risk free rate always positive?
What is the risk of a recession?
What is the systematic risk principle?
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What two factors determine a stock's total return quizlet?
2 factors that determine a stock's total return? R stands for the actual total return in the year, E(R) stands for the expected part of the return and U stand for the unexpected part of the return. Amount of the systematic risk present in a particular risky asset relative to that in an average risky asset.
Which of the following is a good example of systematic risk?
Systematic risk is risk that impacts the entire market or a large sector of the market, not just a single stock or industry. Examples include natural disasters, weather events, inflation, changes in interest rates, war, even terrorism.
What is an uncertain or risky return?
What is an uncertain or risky return? it is the portion of return that depends on information that is currently unknown.
What are the two components of risk in the total return equation?
False; Market risk and unsystematic risk are the two components of risky return in the total return equation. As more securities are added to a portfolio, what will happen to the portfolio's total unsystematic risk? - It is likely to decrease.
Which of the following are examples of systematic risk of a stock?
Systematic Risk - These are market risks that cannot be diversified away. Interest rates, recessions and wars are examples of systematic risks.
What is systematic risk in stock market?
Systematic risk refers to the risk inherent to the entire market or market segment. Systematic risk, also known as “undiversifiable risk,” “volatility” or “market risk,” affects the overall market, not just a particular stock or industry.
How risk and return are related to each other give an example?
Description: For example, Rohan faces a risk return trade off while making his decision to invest. If he deposits all his money in a saving bank account, he will earn a low return i.e. the interest rate paid by the bank, but all his money will be insured up to an amount of….
How risk and returns are related?
A positive correlation exists between risk and return: the greater the risk, the higher the potential for profit or loss. Using the risk-reward tradeoff principle, low levels of uncertainty (risk) are associated with low returns and high levels of uncertainty with high returns.
How risk and return are related to each other give one example?
Understanding risk and return. Some investments are riskier than others – there's a greater chance you could lose some or all of your money. For example, Canada Savings Bonds (CSBs) have very low risk because they are issued by the government of Canada.
What are the basic concepts of risk and return?
The term return refers to income from a security after a defined period either in the form of interest, dividend, or market appreciation in security value. On the other hand, risk refers to uncertainty over the future to get this return. In simple words, it is a probability of getting return on security.
How do you find the risk of a stock?
Beta and standard deviation are two tools commonly used to measure stock risk. Beta, which can be found in a number of published services, is a statistical measure of the impact stock market movements have historically had on a stock's price.
What is the total risk of the stock?
Systematic risk, or total market risk, is the volatility that affects the entire stock market across many industries, stocks, and asset classes. Systematic risk affects the overall market and is therefore difficult to predict and hedge against.
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Solved 1) The vertical intercept of the Security Market Line | Chegg.com
1) The vertical intercept of the Security Market Line (SML) is the a) market interest rate determined by Federal Reserve monetary policy. b) market interest rate determined by congressional monetary policy. c) risk-free interest rate determined by congressional monetary policy.
What is the portion of return that is unaffected by present or future information?
It is the portion of return that is unaffected by present or future information. It is the portion of return that depends on information that is currently known. It is the return that is classified as risky by bond rating agencies . It is the portion of return that depends on information that is currently unknown.
Why is the risk free rate always positive?
Because the risk-free rate is equal to zero. Because the value of beta is always positive. Because the difference between the return on the market and the risk-free rate is likely to be positive. Because the difference between the return on the market and the risk-free rate is likely to be positive.
What is the risk of a recession?
It is a risk that is unavoidable. It is a risk that affects a single asset or a small group of assets. Marks Company believes that there is a sixty percent chance of a recession and a forty percent chance of a boom. In the case of recession, the company expects to earn a 2% return.
What is the systematic risk principle?
It is the portion of return that depends on information that is currently unknown. The systematic risk principle argues that the market does not reward risks: that are dangerous. in any circumstances. that are borne unnecessarily.
What is the portion of return that is unaffected by present or future information?
It is the portion of return that is unaffected by present or future information. It is the portion of return that depends on information that is currently known. It is the return that is classified as risky by bond rating agencies . It is the portion of return that depends on information that is currently unknown.
Why is the risk free rate always positive?
Because the risk-free rate is equal to zero. Because the value of beta is always positive. Because the difference between the return on the market and the risk-free rate is likely to be positive. Because the difference between the return on the market and the risk-free rate is likely to be positive.
What is the risk of a recession?
It is a risk that is unavoidable. It is a risk that affects a single asset or a small group of assets. Marks Company believes that there is a sixty percent chance of a recession and a forty percent chance of a boom. In the case of recession, the company expects to earn a 2% return.
What is the systematic risk principle?
It is the portion of return that depends on information that is currently unknown. The systematic risk principle argues that the market does not reward risks: that are dangerous. in any circumstances. that are borne unnecessarily.
