Quiz Ch 06 – Risk Reduction with Perfectly Correlated Investments
Essentials of Investments
Bodie, Kane, and Marcus
12th Edition
Which type of risk is likely to be minimized if investing in two assets with a correlation coefficient of 1?
Which type of risk is likely to be minimized if investing in two assets with a correlation coefficient of 1?
What metric becomes relevant for assessing security risk when an investor opts not to diversify, placing all funds into one stock?
What is the standard deviation of the global minimum-variance portfolio in a scenario where two securities exhibit a perfect negative correlation?
If stock A’s excess returns correlate with the market index at -1 in a scatter plot, what pattern emerges among the data points, and what defines the slope of the line of best fit?
What are the alternative terms for firm-specific risk?
What are the alternative terms for market risk?
What are the characteristics of beta coefficients for securities?
What factor does beta measure regarding a security’s reactivity?
What does ‘excess return’ signify?
What circumstance leads to a negative beta coefficient for a security?