QUESTION 9 Diversification can reduce the level of systematic risk. True False QUESTION 10 Of the following 4 portfolios, choose the one that is most diversified. A,b,c,d a B C D Amazon Comcast Comcast Comcast Starbucks Toyota Apple Amazon Toyota Exxon Mobil Sony Pfizer (pharmaceuticals) Pfizer (pharmaceuticals) Pfizer (pharmaceuticals) Pfizer (pharmaceuticals) Disney

QUESTION 9 Diversification can reduce the level of systematic risk. True False QUESTION 10 Of the following 4 portfolios, choose the one that is most diversified. A,b,c,d a B C D Amazon Comcast Comcast Comcast Starbucks Toyota Apple Amazon Toyota Exxon Mobil Sony Pfizer (pharmaceuticals) Pfizer (pharmaceuticals) Pfizer (pharmaceuticals) Pfizer (pharmaceuticals) Disney

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter3: Data Visualization

Section: Chapter Questions

Problem 18P: The Ajax Company uses a portfolio approach to manage their research and development (RD) projects....

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Question 5 In class, we discussed the CAPM model and its implications. What is the market portfolio? What assets does the model price? Is the S&P 500 a good proxy for the market portfolio, and if not, why? Please elaborate.
9.2- Use the diagrams to answer the question q3- This question relates to Diagrams 6 - 9 from the Online Quiz 9.2 diagrams, each of which shows a set of portfolios plotted on a set of risk/return axes. Which diagram shows (in red) the set of efficient portfolios in the presence of a risk-free asset? Select one: a. Diagram 6 b. Diagram 7 c. Diagram 8 d. Diagram 9
IBM AMZN E(R) 0.07 0.11 Standard Deviation0.10 0.18 Correlation0.45 Suppose you have the above data on IBM and Amazon, compute the expected return and the standard deviation of an equally weighted portfolio invested in the two securitiesis there a diversification benefit? Please show your work and round to at least 3 decimal places
Question 1Fill the parts in the above table that are shaded in yellow. You will notice that there are nineline items. Question 2 Using the data generated in the previous question (Question 1)a) Plot the Security Market Line b) Superimpose the CAPM’s required return on the SML c) Indicate which investments will plot on, above and below the SML?d) If an investment’s expected return (mean return) does not plot on the SML, what doesit show? Identify undervalued/overvalued investments from the graph
H2. What are the different types of expected return and related risk, for individual assets and for portfolios as a whole. Explain carefully what each type represents and give examples in each case. What type of expected returns does the CAPM model capture? What type of expected return and risk you are exposed to if you have the FTSE 100 INDEX only in the portfolio?
9.2- Use the diagrams to answer the question q2- This question relates to Diagram 5 from the Online Quiz 9.2 diagrams, which shows four different feasible portfolios plotted on a set of risk/return axes. Which portfolio would a risk-averse investor prefer - Portfolio A or Portfolio G? Select one: a. Portfolio A. b. Portfolio G. c. The investor would be indifferent between the two portfolios. d. We cannot tell without more information about the investors attitude towards risk (i.e. how risk-averse the investor is).
The Ajax Company uses a portfolio approach to manage their research and development (RD) projects. Ajax wants to keep a mix of projects to balance the expected return and risk profiles of their RD activities. Consider a situation in which Ajax has six RD projects as characterized in the table. Each project is given an expected rate of return and a risk assessment, which is a value between 1 and 10, where 1 is the least risky and 10 is the most risky. Ajax would like to visualize their current RD projects to keep track of the overall risk and return of their RD portfolio. a. Create a bubble chart in which the expected rate of return is along the horizontal axis, the risk estimate is on the vertical axis, and the size of the bubbles represents the amount of capital invested. Format this chart for best presentation by adding axis labels and labeling each bubble with the project number. b. The efficient frontier of RD projects represents the set of projects that have the highest expected rate of return for a given level of risk. In other words, any project that has a smaller expected rate of return for an equivalent, or higher, risk estimate cannot be on the efficient frontier. From the bubble chart in part a, which projects appear to be located on the efficient frontier?
Choose which portfolio is the optimal risk-return relationship if your client's return preference is greater than 0.405%. stock 1 MRNA MRNA MRNA MRNA MRNA stock 2 SBUX V FLATX BND SP500 0.422% 0.414% 0.347% 0.403% 0.419% return, 0.133% o 0.134% 0.136% 0.131% 0.123% 3.661% 3.686% 3.615% 3.514% 3.652% Op MRNA, SP500 MRNA, FLATX O MRNA, BND MRNA, V
b. As an equity portfolio manager, you may use certain risk-adjusted performance measures. Describe and discuss the following measures of performance evaluation! Treynor Index, William Sharpe, Michael Jensen Using the following table evaluate which is better than other using three different measure of performance evaluation. Asset X E(R)% 12 beta Stdv 1.25 16 Y 11 1.0 12 Risk-free 3 0 0 Market index 12 1 12
Moving to another question will save this response. Quèstion 7 What is the other name for fim-specific risk? O Systematic risk O Market risk O Micro-cap risk O Undiversifiable risk O Diversifiable risk A Moving to another question will save this response. Mac 20 F3 O00 DO0 F4 esc F1 F2 #3 2$ 2 4 W E R
DOUI v allu u 14. You are a portfolio manager that utilizes a constant mix strategy for your portfolio, rebalancing such portfolio means you have to: a. constantly changing the mix between stocks and bonds to time the market b. constantly changing the individual stocks contained in the equity asset allocation category c. maintaining the same relative weighting of asset categories
Consider the following hypothetical firms with their respective beta ABC- 1 MNO- 0 QRS- 1.2 XYZ- 0.85 i. Which firm has the highest risk? ii. Which firm is risk free? iii. Which firm’s returns will be equal to the market returns?

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a	B	C	D
Amazon	Comcast	Comcast	Comcast
Starbucks	Toyota	Apple	Amazon
Toyota	Exxon Mobil	Sony	Pfizer (pharmaceuticals)
Pfizer (pharmaceuticals)	Pfizer (pharmaceuticals)	Pfizer (pharmaceuticals)	Disney