Questions from General Investment

Q: Suppose two assets have zero correlation and the same standard deviation.

Suppose two assets have zero correlation and the same standard deviation. What is true about the minimum variance portfolio?

Q: If the returns on two stocks are highly correlated, what does

If the returns on two stocks are highly correlated, what does this mean? If they have no correlation? If they are negatively correlated?

Q: What is an efficient portfolio?

What is an efficient portfolio?

Q: True or false: If two stocks have the same expected return

True or false: If two stocks have the same expected return of 12 percent, then any portfolio of the two stocks will also have an expected return of 12 percent.

Q: True or false: If two stocks have the same standard deviation

True or false: If two stocks have the same standard deviation of 45 percent, then any portfolio of the two stocks will also have a standard deviation of 45 percent.

Q: Assume you are a very risk-averse investor. Why might

Assume you are a very risk-averse investor. Why might you still be willing to add an investment with high volatility to your portfolio?

Q: What is a stop-loss order? Why might it be

What is a stop-loss order? Why might it be used? Is it sure to stop a loss?

Q: True or false: It is impossible for a single asset to

True or false: It is impossible for a single asset to lie on the Markowitz efficient frontier.

Q: Classify the following events as mostly systematic or mostly unsystematic. Is

Classify the following events as mostly systematic or mostly unsystematic. Is the distinction clear in every case? a. Short-term interest rates increase unexpectedly. b. The interest rate a company pa...

Q: True or false: The most important characteristic in determining the expected

True or false: The most important characteristic in determining the expected return of a well-diversified portfolio is the variances of the individual assets in the portfolio. Explain.