Question

The scroll down options are 1. systematic/unsystematic risk 2. systematic/unsystematic risk 3. standard deviation/risk aversion 4....

Risk is the potential for an investment to generate more than one return. A security that will produce only one known returnYou invest $100,000 in 40 stocks, 20 bonds, and a certificate of deposit (CD). What kind of risk will you primarily be exposeThe scroll down options are

1. systematic/unsystematic risk

2. systematic/unsystematic risk

3. standard deviation/risk aversion

4. correlation coefficient/diversification

Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk- free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability in an investment's possible returns, occurs when there is uncertainty about an investment's future outcome, such as the return expected to be generated by the investment and realized by an investor. As an investor and based on your understanding of risk, which of the following statements is true? O S&P 500 companies that are considered to be riskier than the others will have a lower expected rate of return than the others. O S&P 500 companies that are considered to be riskier than the others will have a higher expected rate of return than the others. Read the following descriptions and identify the type of risk or term being described: Terms Description This type of risk relates to changes in the interest rate. This type of risk relates to the possibility that a firm will not be able to service its existing debt. A measure of the variability of a set of outcomes. This can be used to reduce the stand-alone risk of an investment by combining it with other investments in a portfolio.
You invest $100,000 in 40 stocks, 20 bonds, and a certificate of deposit (CD). What kind of risk will you primarily be exposed to? Portfolio risk O Stand-alone risk Generally, investors would prefer to invest in assets that have: O a low level of risk and high expected returns. O a high level of risk and low expected returns.
0 0
Add a comment Improve this question
Answer #1

Sign Up to Unlock the answer FREE

Already have an account? Log in

1)

The correct statement is statement 2

2)

a) Systematic risk

b) Unsystematic risk

c) Standard deviation

d) Diversification

3)

Portfolio risk

4)

a low level of risk and high expected returns

Add a comment
Know the answer?
Add Answer to:
The scroll down options are 1. systematic/unsystematic risk 2. systematic/unsystematic risk 3. standard deviation/risk aversion 4....
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Read the following descriptions and identify the type of risk or term being described: Description Terms...

    Read the following descriptions and identify the type of risk or term being described: Description Terms A standard measure of the risk per unit of return This type of risk relates to changes in the interest rate This can be used to reduce the stand-alone risk of an investment by combining it with other investments in a portfolio This type of risk relates to the possibility that a firm will not be able to service its existing debt You invest...

  • Dropdown options: 1-risk/return 2-equal to/greater or less than 3-self contained/stand-alone 4-variance/standard deviation 5-variance/beta coefficient 6-diversifiable/non-diversiable 7-is/...

    Dropdown options: 1-risk/return 2-equal to/greater or less than 3-self contained/stand-alone 4-variance/standard deviation 5-variance/beta coefficient 6-diversifiable/non-diversiable 7-is/ is not 8-diversifiable/non-diversifiable 9-random/non random 10-decreasing/increasing 11-2000+/500 12-reduces/increases 13-systematic of market/unsystematic or company-specific 14-diversifiable/non diversifiable 1. Basic concepts - Risk and return Professor Isadore (Izzy) Invest-a-Lot retired two years ago from Exceptional College, a small liberal arts college in North Carolina after teaching corporate finance and investment theory for 35 years. Yesterday, Izzy appear on EC LIVE, a television show produced for the students,...

  • Term Answer Description Risk A. The risk of an asset when it is the only asset...

    Term Answer Description Risk A. The risk of an asset when it is the only asset in an investor's portfolio. Expected rate of return That portion of an investment's risk calculated as the difference between its total risk and its firm-specific risk. Beta coefficient This model determines the appropriate required return on a security as the sum of the market's risk-free rate and a risk premium based on the market's risk premium and the security's beta coefficient. Market risk The...

  • QUESTION 18 Diversification refers to the _____. A. reduction of the stand-alone risk of an individual...

    QUESTION 18 Diversification refers to the _____. A. reduction of the stand-alone risk of an individual investment, measured by the standard deviation of its returns, by combining it with other investments in a portfolio B. reduction of the systematic risk of an individual investment, measured by the standard deviation of its returns, by combining it with other investments in a portfolio C. reduction of the systematic risk of an individual investment, measured by its beta coefficient, by combining it with...

  • Ch 02: Assignment - Risk and Return: Part 1 Term Answer Risk A Expected rate of...

    Ch 02: Assignment - Risk and Return: Part 1 Term Answer Risk A Expected rate of return B Description The rate of return expected to be realized from an investment, calculated as the mean of the probability distribution of its possible returns. The term applied to the risk of an asset that is measured by the standard deviation of the asset's expected returns. The possibility that an actual outcome will be better or worse than its expected outcome The general...

  • Term Answer Description A. The general term that describes the portion of an asset's total expected...

    Term Answer Description A. The general term that describes the portion of an asset's total expected return that is greater than the return earned on the market's risk-free rate Expected rate of return B. The practice of creating a portfolio of assets for the purpose of reducing the stand-alone risk of the individual assets in the portfolio Beta coefficient C. This statistical value provides a standardized measure of a security's risk per unit of return, and is useful in comparing...

  • Term Description Risk A. The term applied to the risk of an asset that is measured...

    Term Description Risk A. The term applied to the risk of an asset that is measured by the standard deviation of the asset's expected returns. That portion of an investment's risk calculated as the difference between its total risk and its firm-specific risk. Expected rate of return B. Beta coefficient L C . This model determines the appropriate required return on a security as the sum of the market's risk-free rate and a risk premium based on the market's risk...

  • Term Answer Description Risk A. The potential for variability in the possible outcomes associated with an...

    Term Answer Description Risk A. The potential for variability in the possible outcomes associated with an investment. Expected rate of return The portion of an asset's total expected return required by investors as compensation for assuming the additional risks associated with the security, the issuer, and the marketplace. Beta coefficient That portion of an investment's risk calculated as the difference between its total risk and its firm-specific risk. Market risk The mean of the probability distribution of an investment's possible...

  • 11. The square of the standard deviation is known as the ________. A. Beta B. Expected...

    11. The square of the standard deviation is known as the ________. A. Beta B. Expected return C. Coefficient of variation. D. Variance 12. Why companies invest in projects with negative NPV? A. Because there is hidden value in each project B. Because they have chance of rapid growth C. Because they have invested a lot D. All of the given options 13. An investor was expecting a 18% return on his portfolio with beta of 1.25 before the market...

  • PLEASE EXPLAIN WHY ANSWER IS TRUE OR FALSE: "Risk aversion" implies that investors require higher expected...

    PLEASE EXPLAIN WHY ANSWER IS TRUE OR FALSE: "Risk aversion" implies that investors require higher expected returns on riskier than on less risky securities. a.   True                                                    b.   False When adding a randomly chosen new stock to an existing portfolio, the higher (or more positive) the degree of correlation between the new stock and stocks already in the portfolio, the less the additional stock will reduce the portfolio's risk. a.   True b.   False An individual stock's diversifiable risk, which is measured...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT