AI THÔNG MINH HƠN HỌC SINH LỚP 5?

The standard deviation of a two-asset portfolio is a linear function of the assets' weights when:

• 
  the assets have a correlation coefficient less than zero.

• the assets have a correlation coefficient equal to zero.

• the assets have a correlation coefficient greater than zero.

• the assets have a correlation coefficient equal to one.

Answer explanation

The standard deviation of a two-asset portfolio is a linear function of the assets' weights when the assets have a correlation coefficient equal to one.

Which statement about portfolio diversification is correct?

• Typically, as more securities are added to a portfolio, total risk would be expected to decrease at a decreasing rate.

• Proper diversification can eliminate systematic risk.

• The risk-reducing benefits of diversification do not occur meaningfully until at least 50-60 individual securities have been purchased.

• None of the above statements are correct.

Answer explanation

Typically, as more securities are added to a portfolio, total risk would be expected to decrease at a decreasing rate.

All things equal, diversification is most effective when:

• securities' returns are positively correlated.

• securities' returns are negatively correlated.

• securities' returns are uncorrelated.

• securities' returns are high.

Answer explanation

Diversification is most effective when securities' returns are negatively correlated, as it helps reduce overall portfolio risk by offsetting losses in one asset with gains in another.

When an investment opportunity set is formed with two securities that are perfectly negatively correlated, the global minimum variance portfolio has a standard deviation that is always:

• equal to zero.

• greater than zero.

• equal to the sum of the securities' standard deviations.

• equal to –1.

Answer explanation

The global minimum variance portfolio with perfectly negatively correlated securities has a standard deviation equal to zero.

Efficient portfolios of N risky securities are portfolios that:

• are formed with the securities that have the highest rates of return regardless of their standard deviations.

• have the highest rates of return and the highest standard deviations.

• are selected from those securities with the lowest standard deviations regardless of their returns.

• have the highest rates of return for a given level of risk.

Answer explanation

Efficient portfolios of N risky securities are portfolios that have the highest rates of return for a given level of risk.

An investor who wishes to form a portfolio that lies to the right of the optimal risky portfolio on the Capital Allocation Line must:

• lend some of her money at the risk-free rate and invest the remainder in the optimal risky portfolio.

• borrow some money at the risk-free rate and invest in the optimal risky portfolio.

• such a portfolio cannot be formed.

• invest only in risky securities.

• B and D

Answer explanation

To form a portfolio to the right of the optimal risky portfolio, the investor must borrow money at the risk-free rate (choice B) and invest only in risky securities (choice D), hence the correct choices are B and D.

Portfolio theory as described by Markowitz is most concerned with:

• the elimination of systematic risk.

• the identification of unsystematic risk.

• the effect of diversification on portfolio risk.

• active portfolio management to enhance returns.

Answer explanation

Portfolio theory as described by Markowitz is most concerned with the effect of diversification on portfolio risk.

A statistic that measures how the returns of two risky assets move together is:

• correlation & variance

• standard deviation.

• covariance & variance

• variance.

Answer explanation

The correct answer is correlation & variance because correlation measures how two assets move together, while variance measures the dispersion of returns.

The individual investor's optimal portfolio is designated by:

• the point of tangency with the opportunity set and the capital allocation line.

• the point of highest reward to variability ratio in the opportunity set.

• the point of tangency with the indifference curve and the capital allocation line.

• the point of the highest reward to variability ratio in the indifference curve.

Answer explanation

The individual investor's optimal portfolio is designated by the point of tangency with the indifference curve and the capital allocation line.

Security C has expected return of 12% and standard deviation of 20%. Security D has expected return of 15% and standard deviation of 27%. If the two securities have a correlation coefficient of 0.7, what is their covariance?

• 0.038

• 0.070

• 0.018

• 0.013

Answer explanation

The covariance between Security C and Security D is calculated as Cov(C,D) = Corr(C,D) * StdDev(C) * StdDev(D) = 0.7 * 20% * 27% = 0.038. Therefore, the correct answer is 0.038.