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If a stock portfolio is well diversified, then the portfolio variance: will equal...

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Finance

  1. If a stock portfolio is well diversified, then the portfolio variance:

    1. will equal the variance of the most volatile stock in the portfolio.

    2. must be equal to or greater than the variance of the least risky stock in the portfolio.

    3. will be a weighted average of the variances of the individual securities in the portfolio.

    4. will be an arithmetic average of the variances of the individual securities in the portfolio.

    5. may be less than the variance of the least risky stock in the portfolio.

  2. Question 8

    2 Points

    Which one of the following is most directly affected by the level of systematic risk in a security?

    1. Market risk premium

    2. Expected rate of return

    3. Risk-free rate

    4. Standard deviation of the returns

    5. Volatility of the returns

  3. Question 9

    2 Points

    Which one of the following is represented by the slope of the security market line?

    1. Beta coefficient

    2. Expected rate of return

    3. Market risk premium

    4. Market standard deviation

    5. Risk-free interest rate

  4. Question 10

    2 Points

    According to the capital asset pricing model, fairly priced securities have ________.

    1. negative betas

    2. positive alphas

    3. positive betas

    4. zero alphas

    5. negative alphas

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