FI 393 Study Guide - Final Guide: Capital Asset Pricing Model, Capital Market, Capital Asset
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The standard deviation of portfolio Aâs returns for the coming year is 3%. The standard deviation of portfolio Bâs returns for the coming year is 7%. Portfolio A has an expected return of 12%, while Portfolio Bâs expected return is 15%. If Portfolio A is less risky, why would an investor select Portfolio B?
a. | Two-thirds of the time, Portfolio A has an expected return range of between 9% to 15%. | |
b. | Two-thirds of the time, Portfolio B has an expected return range of between 8% to 22%. | |
c. | Two-thirds of the time, the higher risk of Portfolio B is offset by a comparable expected return range on the low side, and a superior expected return range on the high side. | |
d. | Given the data, an investor would not reasonably consider investing in Portfolio B. |
The Russian securities market plummeted at the news that Western Europe and the United States threatened economic sanctions against Russia in retaliation for its occupation of the Crimea. The risk to securities that is affected by news of this sort is termed what?
a. | Systematic risk. | |
b. | Unsystematic risk. | |
c. | Diversifiable risk. | |
d. | Nondiversifiable risk. | |
e. | Both (a) and (d). | |
f. | Both (b) and (c). |