Questions from General Investment

Q: How do you calculate the return and standard deviation of a portfolio

How do you calculate the return and standard deviation of a portfolio? Compare the calculation of a portfolio’s standard deviation with that for a single asset.

Q: What is correlation, and why is it important? Describe the

What is correlation, and why is it important? Describe the characteristics of returns that are (a) positively correlated, (b) negatively correlated, and (c) uncorrelated. Differentiate between perfect...

Q: What is diversification? How does the risk of a diversified portfolio

What is diversification? How does the risk of a diversified portfolio compare with the risks of the individual assets it contains?

Q: Discuss how correlation affects the risk and return of a portfolio of

Discuss how correlation affects the risk and return of a portfolio of two securities. Does correlation affect the maximum or minimum return that a portfolio of two assets can achieve? How are the maxi...

Q: What benefit, if any, does international diversification offer the individual

What benefit, if any, does international diversification offer the individual investor? Compare and contrast the methods of achieving international diversification by investing abroad versus investing...

Q: Briefly define and give examples of each of the following components of

Briefly define and give examples of each of the following components of total risk. Which type of risk matters, and why? a. Diversifiable (or firm-specific) risk b. Undiversifiable (or systematic) ris...

Q: Explain what is meant by beta. What risk does beta measure

Explain what is meant by beta. What risk does beta measure? What is the market return? How is the interpretation of beta related to the market return?

Q: You have been researching a stock that you like, which is

You have been researching a stock that you like, which is currently trading at $39 per share. You would like to buy the stock if it were a little less expensive—say, $36 per share. You believe that th...

Q: What range of values does beta typically exhibit? Are positive or

What range of values does beta typically exhibit? Are positive or negative betas more common? Explain.

Q: What is a common stock? What is meant by the statement

What is a common stock? What is meant by the statement that holders of common stock are the residual owners of the firm?