Module 2 Videos

Question 1

the inherent factors that can negatively impact individual securities or a very specific group of assets

Answer 1

idiosyncratic risk

Question 2

the risk inherent to the entire market or market segment, any risk that affects a large number of assets, each to a greater or lesser degree

Answer 2

systematic risk

Question 3

Expected return =

Answer 3

long term mean

Question 4

In a portfolio, the less correlated the assets are, the ______the st.dev will be.

Answer 4

lower

Question 5

What is the stdev of a tbill?

Answer 5

0

Question 6

What is the correlation between something constant and something moving.

Answer 6

zero

Question 7

Ratio of portfolio risk premium to standard deviation, compares the return of an investment with its risk

Answer 7

Sharpe ratio, also the slope

Question 8

a measure of systematic risk

a measure of a stock’s volatility in relation to the overall market. By definition, the market, such as the S&P 500 Index, has a ____of 1.0, and individual stocks are ranked according to how much they deviate from the market. A stock that swings more than the market over time has a _____above 1.0.

Answer 8

beta

Question 9

For a well diversified portfolio, unsystematic risk is _____

Answer 9

small

Question 10

he plot that connects all the northwestern-most portfolios is called the ——– of risky assets. It represents the set of portfolios that offers the highest possible expected rate of return for each level of portfolio standard deviation. These portfolios may be viewed as efficiently diversified.

Answer 10

efficient frontier

Question 11

represents portfolios that optimally combine risk and return. It is a theoretical concept that represents all the portfolios that optimally combine the risk-free rate of return and the market portfolio of risky assets.

Is it preferred over EF?

Answer 11

capital mkt line, yes

Question 12

A high beta = ____ return and ____ price.

Answer 12

high, low

Question 13

When you combine the ________ on the ______ with the _______, you maximize the ______. You get the best ratio of excess returns to total risk.

Answer 13

tangent portfolio
Efficient frontier
Riskless asset/tbill
Sharpe Ratio

Question 14

Plot of risk-return combinations available by varying portfolio allocation between a risk-free asset and a risky portfolio

Answer 14

Capital allocation line

Question 15

risk that specifically affects a single asset or small group of assets

Answer 15

unsystematic risk

Question 16

What line do you want to be on?

Answer 16

Capital Market Line