Decrease the variance of a portfolio of assets

Assignment Help Financial Management

Reference no: EM13847472

Please mark the following as either True or False

1. To decrease the variance of a portfolio of assets, simply add assets with low/small variance.

2. An investor who is in the 33% tax bracket is indifferent between a 9% tax-free muni and a 6% taxable bond.

3. The standard deviation of a portfolio of assets is simply the weighted average of the standard deviations of the individual assets.

4. The formula of the approximations of the real return becomes less accurate as the rate of inflation increases.

5. When deciding between a risky asset (or portfolio) and a risk-free asset, the more risk averse the investor, the greater the proportion they will choose to invest in the risky asset

Reference no: EM13847472

Questions Cloud

Formula of approximations of real return-rate of inflation : The formula of the approximations of the real return becomes less accurate as the rate of inflation increases. When deciding between a risky asset (or portfolio) and a risk-free asset, the more risk averse the investor, the greater the proportion the..

Weighted average of standard deviations of individual assets : An investor who is in the 33% tax bracket is indifferent between a 9% tax-free muni and a 6% taxable bond. The standard deviation of a portfolio of assets is simply the weighted average of the standard deviations of the individual assets.

What is the price and expected return relation : For a given set of possible cash flows, as the required risk premium for a project increases, its price must decrease to entice investors to purchase the asset. (Hint: What is the price and expected return (premium) relation?) Eurodollars are dollar-..

What is the incremental operating profit : Bangers, Inc. is a start-up manufacturer of Australian-style frozen veggie pies located in San Antonio, Texas. The company is five years old and recently installed the manufacturing capacity to quadruple its unit sales. what is the incremental operat..

Decrease the variance of a portfolio of assets : To decrease the variance of a portfolio of assets, simply add assets with low/small variance. An investor who is in the 33% tax bracket is indifferent between a 9% tax-free muni and a 6% taxable bond. The standard deviation of a portfolio of assets i..

What is your expected annualized yield on this loan : Assume you are a mortgage lender. You have offered a borrower a mortgage loan for $600,000 with a somewhat unusual structure. What is your expected annualized yield on this loan if you believe the borrower will prepay the loan at the end of the year ..

What is the ex ante real interest rate : Suppose that in 2014 Julie lends Bill $1,000 to be repaid in 2015 at a nominal interest rate of 5%. Additionally, suppose Julie and Bill both expect prices to rise by 2% between 2014 and 2015. What is the ex ante real interest rate? How much money do..

Analysis of future value-types of boreholes for drilling : In some manufacturing operation three types of boreholes for drilling may be used. The cheapest is a stainless high speed steel (HSS), but has a shorter one of gold or another oxide of titanium nitride life. what kind of hole should be used, accordin..

Calculate the value of share of stock : Using the P/E ratio approach to valuation, calculate the value of a share of stock.

User Account

All Pages