In general, the the correlation between asset returns, the the risk reduction that investors can achieve by diversifying. O a. lower; lower b. greater; greater O c. lower; greater d. greater; lower
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- What does Jensen's alpha measure? a. An investor's reward in proportion to their assumption of systematic risk b. The abnormal return of an asset, defined as the degree to which its actual return exceeds that predicted by the capital asset pricing model c. The degree to which diversifiable risk is eliminated d. How much reward an investor is getting for each unit of risk assumedThe desired rate of return on an investment should reflect the degree of risk involved. A. True B. FalseA reasonable probability that an investment will produce a loss a. risk b. value c. specualtion d. capital gain
- A realized return is the rate of return actually earned on an investment. Group of answer choices True FalseThe capital asset pricing model expresses the cost of equity as a function of a return on riskless assets, a market premium, and: Select one:a. Unsystematic risk.b. None of these.c. The cost of debt.d. Systematic risk.Give typing answer with explanation and conclusion The additional compensation that investors require to take on higher risk investments is the a. standard deviation. b. coefficient variation. c. Sharpe ratio. d. risk premium. e. risk aversion.
- The Capital Asset Pricing Model (CAPM) asserts that an asset’s expected return is equal to the risk-free rate plus a risk premium for: a. Volatility b. Systematic risk c. Non-systematic risk d. Diversification e. Marginal utility of consumptionWhich of the following decision criteria is the easiest to use and very popular among investors? O Payback period. O Internal rate of return. O Average accounting return. Net present value. O Discounted return on investment.Generally, the ____ is considered to be a more realistic reinvestment rate than the ____. a. risk-free rate; cost of capital b. risk-free rate; internal rate of return c. cost of capital; internal rate of return d. internal rate of return; cost of capital
- Whenever you make an investment decision, you need to consider its impacts on the diversification of your portfolio and the allocation of your assets. a. false b. depends c. maybe d. true1. How to compare different assets in investment selection process? 2. What are the quantitative characteristics of the assets and how to measure them? 3. How does one asset in the same portfolio influence the other one in the same portfolio? 4. And what could be the influence of this relationship to the investor’s portfolio? 5. What is relationship between the returns on an asset and returns in the whole market (market portfolio)?According to the capital asset pricing model, assets with Lower; lower; unsystematic Higher; higher, unsystematic Lower; higher; unsystematic Higher; higher; systematic Higher; lower; systematic betas have expected returns because betas quantify the degree of risk. Please fill in the blank.