Components of Risk & Portfolio Risk
Assess your understanding of systematic risk, unsystematic risk, portfolio return and portfolio risk. Below quiz is compiled with open source MCQs available as student resources and questions framed by us. The idea is to make online learning interesting and productive.
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No matter how large the number of stocks in the portfolio is, the risk that cannot be diversified away is the:
An "aggressive" common stock would have a "beta"
Equal to zero.
Equal to one.
Less than one.
Greater than one.
A negative correlation coefficient indicates that two securities:
are independent of each other
move in the same direction
move in opposite directions
have zero covariance
If the book value is greater than market value comparison with the investors for future stock are considered as
Which of the following is not a variable in the calculation of the variance of a portfolio?
The variance of each asset
The expected return of each asset
The proportion invested in each asset
The correlations between assets
The risk reduction of a two-asset portfolio is largest when the correlation between two assets is:
Covariances between assets:
Can only be positive
Play an important role in determining a portfolio's expected return
Can only fluctuate between -1 and +1
Measure the degree of dependency between two assets
A line that describes the relationship between an individual security's returns and returns on the market portfolio.
Security market line
Capital market line
The benefits of diversification increase as the:
correlation between the returns of the securities in the portfolio increases
number of stocks in the portfolio decreases
correlation between the returns of the securities in the portfolio decreases
number of stocks in the same industry increases
The risk of a stock in a portfolio can be expressed using the ______________instead of the covariance.
Coefficient of variation
The market portfolio has a beta of:
The _______________ is a measure of the tendency of the returns to move together.
This type of risk is avoidable through proper diversification.
In securities analysis, there should be a risk-return trade off with higher risk assets having __________ expected returns than lower-risk assets.
None of the above
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