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The correlation between asset A and asset B is 0. Which of the following statements is true?
There is no diversification benefit in combining the two assets in a portfolio. |
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There are diversification benefits in combining the two assets in a portfolio. |
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All risk averse investors will want to invest in A only. |
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All risk averse investors will want to invest in B only. |
QUESTION 14
You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 40%, respectively. X has an expected rate of return of 14%, and Y has an expected rate of return of 10%. If you decide to hold 60% of your complete portfolio in the risky portfolio and 40% in the Treasury bills, then the dollar values of your positions in X and Y, respectively, would be __________ and _________.
$360; $240 |
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$150; $100 |
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$100; $150 |
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$120; $250 |
QUESTION 15
You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of Treasury bills that pay 5% and a risky portfolio, P, constructed with two risky securities, X and Y. The optimal weights of X and Y in P are 60% and 40%, respectively. X has an expected rate of return of 14%, and Y has an expected rate of return of 10%. The dollar values of your positions in X, Y, and Treasury bills would be _________, __________, and __________, respectively, if you decide to hold a complete portfolio that has an expected return of 12%.
$570; $380; $50 |
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$243; $162; $595 |
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$595; $162; $243 |
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$595; $243; $162 |
QUESTION 16
Which of the following is best described as nondiversifiable/market risk?
Biogen’s Alzheimer drug failed trial. |
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Tesla’s chief engineer leaves the company. |
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Peloton recalls its treadmills due to safety concern. |
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world war |