Portfolio Risk and Return: Part I

Question 1

__________ is most appropriate for a single, predefined holding
period.

Answer 1

Holding period return

Question 2

The risk of a two- asset portfolio is dependent on _________, _____________ and ____________. As the number of assets in a portfolio increases, the correlation among asset risks becomes a ______ important determinate of portfolio risk

Answer 2

the proportions of each asset, their standard deviations, The correlation (or covariance) between the asset’s
returns, more

Question 3

The ________ theorem allows us to separate decision making into two steps. In the first step, the optimal risky portfolio and the capital allocation line are identified, which are the same for all investors. In the second step, investor risk preferences enable us to find a unique optimal investor portfolio
for each investor.

Answer 3

two-fund separation

Question 4

The addition of a risk- free asset creates portfolios that are dominant to portfolios of risky assets in all cases except for _________.

Answer 4

the optimal risky portfolio

Question 5

The time-weighted rate of return is a _________.

Answer 5

geometric mean

Question 6

Covarience formula

Answer 6

Check it out!

Question 7

The curve that lies above and to the right of the global minimum- variance portfolio is referred to as the ______________ because it contains all portfolios of
risky assets that rational, risk- averse investors will choose

Answer 7

Markowitz efficient frontier