ES&M EXAM 3

¡Supera tus tareas y exámenes ahora con Quizwiz!

variance

Which of the following statistics cannot be negative?

average return

Which one of the following stock return statistics fluctuates the most over time?

optimal mix of the risk-free asset and risky asset

An investor's degree of risk aversion will determine his or her ______.

asset A

Asset A has an expected return of 15% and a reward-to-variability ratio of .4. Asset B has an expected return of 20% and a reward-to-variability ratio of .3. A risk-averse investor would prefer a portfolio using the risk-free asset and ______.

requires a risk premium to take on the risk

Both investors and gamblers take on risk. The difference between an investor and a gambler is that an investor _______.

capital allocation line

In the mean standard deviation graph, the line that connects the risk-free rate and the optimal risky portfolio, P, is called the _________.

II only

Security A has a higher standard deviation of returns than security B. We would expect that: I. Security A would have a risk premium equal to security B. II. The likely range of returns for security A in any given year would be higher than the likely range of returns for security B. III. The Sharpe ratio of A will be higher than the Sharpe ratio of B.

the returns on the stock and bond portfolios tend to vary independently of each other

Suppose that a stock portfolio and a bond portfolio have a zero correlation. This means that ______.

highest; steepest

The _________ reward-to-variability ratio is found on the ________ capital allocation line.

the risk-free asset and the risky portfolio combined

The complete portfolio refers to the investment in _________.

their covariance divided by the product of their standard deviations

The correlation coefficient between two assets equals _________.

rate of return in excess of the Treasury-bill rate

The excess return is the _________.

the weighted sum of the securities' expected returns

The expected rate of return of a portfolio of risky securities is _________.

the slope of the capital allocation line

The reward-to-volatility ratio is given by _________.

the risk-free asset combined with at least one risky asset

The term complete portfolio refers to a portfolio consisting of _________________.

neither asset A nor asset B is acceptable

Two assets have the following expected returns and standard deviations when the risk-free rate is 5%: Asset A E(rA) = 10% σA = 20% Asset B E(rB) = 15% σB = 27% An investor with a risk aversion of A = 3 would find that _________________ on a risk-return basis.


Conjuntos de estudio relacionados

First 10 States and their Capitals

View Set

CHAPTER 7. FROM DNA TO PROTEIN: HOW CELLS READ THE GENOME

View Set

Phylogeny - What is it? What is it used for?

View Set