Chapter 11 LearnSmart

The computation of variance requires 4 steps. Place the steps in the correct order from the first to last step

Calculate the expected return Calculate the deviation of each return from the expected return Square each deviation Calculate the average squared deviation

If you wish to create a portfolio of stocks, what is the required minimum number of stocks?

You must invest in stocks of more than one corporation

By definition, what is the beta of the average asset equal to?

1

The calculation of a portfolio beta is similar to the calculation of:

A portfolio's expected return

Which of the following are examples of a portfolio?

Investing $100,000 in the stocks of 50 publicly traded corporations Investing $100,000 in a combination of stocks and bonds Investing $100,000 in a combination of US and Asian stocks

What is true about variance?

Standard deviation is the square root of variance Variance is a measure of the squared deviations of a security's return from its expected return

The systematic risk principle argues that the market does not reward risks:

That are borne unnecessarily That are diversifiable

Expected return

it is the return that an investor expects to earn on a risky asset in the future

Risk premium

the difference between the return on a risky investment and that on a risk-free investment

A portfolio can be described by its portfolio weights which are defined as

the percentage of dollars invested in each asset

If investors are risk averse, it is reasonable to assume that the risk premium for the stock market will be positive

true