Which of the following statements is most correct?
a.It is possible to have a situation where the market risk of a single stock is less than the market risk of a portfolio of stocks.
b.The market risk premium will increase if, on average, market participants become more risk averse.
c.If you selected a group of stocks whose return is perfectly positively correlated, then you could end up with a portfolio for which none of the unsymmetric risk is diversified away.
d.Statements a and b are correct.
e.All of the statements above are correct.
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Answer: e. All of the statements above are correct.
a is correct. Beta of a Stock can be less than the beta of ...
Solution Summary
Answer to a multiple choice question on risk of holding securities.
... Answer: Implication: Investors should hold diversified portfolio of ... benefits) instead of holding 1-stock ... portfolio, the diversifiable risk/unsystematic risk of ...
... yield = 1.22/10 = 0.122 = 12.2% Total holding period return ... The first risk comes from the general conditions of ... economic, there are firm specific risks such as ...
...Risk can be minimized by holding the portfolios ... This implies that investors hold well diversified portfolios ... the one-stock investor bears high stand alone risk. ...
... an A-rate bond to compensate investor for holding a riskier ... 6. List and concisely discuss the risks faced by ... Interest rate risk which is the risk that interest ...
... the inflation rate in Britain, other things held constant, the ... All securities are of equal risk, and Japanese ... Assuming that interest rate parity holds in all ...
... Which is the best measure of risk for an asset held... is the best measure for an asset held in a ... return for the Scientific Investment Fund, which holds 4 stocks. ...
... The unrealized holding gains and losses are excluded from earnings ... of information investors receive about the risks related to ... get to know the real risk of the ...
... liquid marketable securities is a substitute for holding cash because ... inflation rate in Sweden, other things held constant, the ... (C) Political risk be excluded ...
... The risks in holding individual stocks ... The unique risk of stocks can be diversified away if a portfolio of stocks is held rather than individual stock. ...
... The risk-free rate is 4.9 percent, and the expected return ... Assume the capital-asset- pricing model holds. What expected rate of return would a security earn if ...
