Which Of The Following Describes A Portfolio That Plots Below The Security Market Line? Question Answer Which of the following describes a portfolio that plots below the security market line? If it is below the line, you’re not getting enough return given its risk. (risk ratio is too low) interest gets smaller when principle__ gets
What Type Of Risk Can Be Eliminated Through Diversification? Unsystematic risk Can diversification eliminate all risk? While diversification can reduce risk, it can’t eliminate all risk. Diversification reduces asset-specific risk – that is, the risk of owning too much of one stock (such as Amazon) or stocks in general (relative to other investments). What type
Can A Risky Asset Have A Beta Of Zero? Yes. It is possible, in theory, to construct a zero beta portfolio of risky assets whose return would be equal to the risk-free rate. It is also possible to have a negative beta; the return would be less than the risk-free rate. Do risk-free assets have
What Are The Disadvantages Of Investing In Commodities? Disadvantages of commodity investment Commodities are very high risk as they can fall very sharply in value. They are closely correlated to global economic growth and so may fall sharply in value during global economic slowdowns. This can effectively cancel their usefulness as a diversifier. Is it
What Type Of Risks Do Financial Firms Face When Interest Rates Change? Financial firms typically face two main kinds of interest rate risk as the market interest rates move. These include: Price risk: The market value of bonds or assets falls when interest rates rise. Reinvestment risk: Falling interest rates make interest payments (coupons) of
What Are The Risks Of Real Estate Investment? Financial Risk: A number of people take huge debts for investing in property. … Liquidity Risk: … Management Risk: … Legislative Risk: … Environmental Risk: What are the risk involved in real estate investment? Financial Risk: A number of people take huge debts for investing in property.
Is The Amount Of Systematic Risk Present In A Particular Risky Asset Relative To That In An Average Risky Asset? The amount of systematic risk present in a particular risky asset, relative to the systematic risk present in an average risky asset, is called the particular asset’s: … The linear relation between an asset’s expected
What Are Systematic And Unsystematic Risk? Unsystematic risk is a risk specific to a company or industry, while systematic risk is the risk tied to the broader market. Systematic risk is attributed to broad market factors and is the investment portfolio risk that is not based on individual investments. What is risk and what is
What Are The Problems With CAPM? Another disadvantage in using the CAPM in investment appraisal is that the assumption of a single-period time horizon is at odds with the multi-period nature of investment appraisal. While CAPM variables can be assumed constant in successive future periods, experience indicates that this is not true in the real
What Is An Example Of Speculation? Speculation is the act of formulating an opinion or theory without fully researching or investigating. An example of speculation is the musings and gossip about why a person got fired when there is no evidence as to the truth. What is a modern day example of speculation? For example,