EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Chapter 7, Problem 6CP
Summary Introduction
To select: The measure of risk for a security held in a diversified portfolio.
Introduction: The prospects of loss in particular security due to normal or abnormal fluctuations in the price is known as risk. Standard deviation is the measure of risk.
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The measure of risk for a security held in a diversified portfolio is:a. Specific risk.b. Standard deviation of returns.c. Reinvestment risk.d. Covariance.
Portfolio risk is comprised of risk,
risk.
Select one:
a. diversifiable; plus unsystematic
Market risk is referred to as:
systematic risk.
total risk.
diversifiable risk.
asset specific risk.
Chapter 7 Solutions
EBK INVESTMENTS
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- Portfolio risk is comprised of risk risk. Select one: O a. firm-specific; plus diversifiable b. systematic; minus unsystematic O c. diversifiable; plus unsystematic O d. market; plus non-diversifiable O e. market; plus firm-specificarrow_forwardThe measure of risk for a security held in a diversified portfolio is: Specific risk. Standard deviation of returns. Reinvestment risk. Covariance.arrow_forwardExplain the difference between (a) stand-alone risk and (b) risk in a portfolio context. How are they measured or calculated, and are they relevant to investors?arrow_forward
- Differentiate between (a) stand-alone risk and(b) risk in a portfolio contextarrow_forwardWhich of the following measures reflects the excess return earned on a portfolio per unit of its systematic risk a. Treynor’s measure b. Sharpe’s measure c. Jensen’s measure d. Total measurearrow_forwardStandard deviation of portfolio returns is a measure of ___________. Group of answer choices total risk systematic risk market risk firm-specific risk unsystematic riskarrow_forward
- Which one of the following is the formula that explains the relationship between the expected returnon a security and the level of that security's systematic risk?Select one:a. Time value of money equationb. Unsystematic risk equationc. Expected risk formulad. Market performance equatione. Capital asset pricing modelarrow_forwardCompare and contrast systematic and unsystematic risk and how it affects a portfolio.arrow_forwardThe security market line depicts: a. Expected return as a function of systematic risk (indicated by beta) b. The market portfolio as the optimal portfolio of risky assets c. The relationship between a security’s return and the return on the index d. Portfolio combinations of the market portfolio and the risk-free asset e. Expected return as a function of volatilityarrow_forward
- The security market line depicts:a. A security’s expected return as a function of its systematic risk.b. The market portfolio as the optimal portfolio of risky securities.c. The relationship between a security’s return and the return on an index.d. The complete portfolio as a combination of the market portfolio and the risk-free asset.arrow_forwardTotal risk can be divided into: standard deviation and variance. standard deviation and covariance. portfolio risk and beta. systematic risk and unsystematic risk. portfolio risk and covariance.arrow_forwardThe Capital Asset Pricing Model (CAPM) considers which type of risk in pricing the expected returns and risk of securities? A) Systemic risk. B) Unsystemic risk. C) Diversifiable risk. D) Non-market risk.arrow_forward
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