Portfolios. A collection of Assets (each asset will have its own level of potential risk and reward) The Expected Return of a Portfolio. The weighted average of the expected returns for each asset in the portfolio.
What is the best definition of efficient portfolio quizlet?
efficient portfolio. – a portfolio that maximizes return for a given level of risk.
Which of the following describes an investment that plots on the security market line?
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| Question | Answer |
|---|---|
| diversfiable risk | company specific, unsystematic |
| Which of the following describes a portfolio that plots above the security market line | The security’s return to risk ratio is too high. |
| beta | a measure of an assets nondiversifiable (market) risk -slope of the line is the stock’s beta |
What is portfolio Banking?
A portfolio is a collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange traded funds (ETFs). A portfolio may contain a wide range of assets including real estate, art, and private investments.
What is the purpose of a diversified portfolio quizlet?
The purpose of diversification is to reduce risk. an optimum mix such any change would either increase risk or reduce return. It is perfectly diversified. measures the mix of various asset classes; it accounts for 94% of the differences between the returns various portfolios.
What is the best definition of efficient portfolio?
In an efficient portfolio, investable assets are combined in a way that produces the best possible expected level of return for their level of risk—or the lowest risk for a target return. The line that connects all these efficient portfolios is known as the efficient frontier.
What makes a portfolio efficient?
An efficient portfolio is either a portfolio that offers the highest expected return for a given level of risk, or one with the lowest level of risk for a given expected return. The efficient frontier represents that set of portfolios that has the maximum rate of return for every given level of risk.
What is the principle of portfolio diversification?
That portfolios of different sorts of assets differently correlated with one another will have negligible unsystematic risk. In other words, unsystematic risks disappear in diversified portfolios, and only systematic risks persist, those related to particular assets.
What are the features of portfolio diversification?
Let’s identify three characteristics of a diversified portfolio: A mix and a variety of asset classes. Diversified portfolios use a blend of equities (stocks), fixed income (bonds), cash and cash equivalents (U.S. Government Treasury Bills), real estate and commodities (metals and energy).
