What happens to estimated return and risk for individual assets when contributed to a portfolio? o The expected return of the portfolio increases as the riskiness of the portfolio decreases. o As the riskiness of a portfolio decreases the expected return of the portfolio increases. o the expected return of the portfolio decreases as the riskiness of a portfolio increases. o The expected return of the portfolio is static as the riskiness of the portfolio increases. o As the riskiness of a portfolio increases the expected return of the portfolio increases. o The expected return of the portfolio is static as the riskiness of a portfolio decreases.
Added by Immy B.
Step 1
Firstly, the expected return of a portfolio is the weighted average of the expected returns of the individual assets in the portfolio. Show more…
Show all steps
Your feedback will help us improve your experience
James Kiss and 91 other Financial Algebra educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
The Capital Asset Pricing Model (CAPM) is a financial model that assumes returns on a portfolio are normally distributed. Suppose a portfolio has an average annual return of 14.7% (i.e. an average gain of 14.7%) with a standard deviation of 33%. A return of 0% means the value of the portfolio doesn’t change, a negative return means that the portfolio loses money, and a positive return means that the portfolio gains money. What percent of years does this portfolio lose money, i.e. have a return less than 0%? What is the cutoff for the highest 15% of annual returns with this portfolio?
David N.
The Capital Asset Pricing Model (CAPM) is a financial model that assumes returns on a portfolio are normally distributed. Suppose a portfolio has an average annual return of 14.7% (i.e. an average gain of 14.7%) with a standard deviation of 33%. A return of 0% means the value of the portfolio doesn't change, a negative return means that the portfolio loses money, and a positive return means that the portfolio gains money. (Please round answers to within one hundredth of a percent) (a) What percent of years does this portfolio lose money, i.e. have a return less than 0%? % (b) What is the cutoff for the highest 15% of annual returns with this portfolio? %
Kari H.
A portfolio consists of two assets, the expected returns and standard deviations of returns of which are listed in the table below: Asset 1 Expected Return: 8% Standard Deviation: 16% Asset 2 Expected Return: 10% Standard Deviation: 20% Required: Calculate: 1. The expected return for a portfolio which is equally weighted between the two assets. 2. The correlation coefficient for the two-asset portfolio, assuming that the covariance is 32. 3. The variance of returns for the equally weighted portfolio, assuming a covariance of 32. 4. The standard deviation of returns for the equally weighted portfolio.
Adi S.
Recommended Textbooks
Mathematics for Finance An Introduction to Financial Engineering
Universe: Solar System, Stars, and Galaxies
The Mathematics of Financial Derivatives: A Student Introduction
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD