This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Discuss whether the standard deviation of a portfolio is, or is not, a weighted average of the ... (Read 77 times)

go.lag

  • Hero Member
  • *****
  • Posts: 667
on: Jul 11, 2018
Discuss whether the standard deviation of a portfolio is, or is not, a weighted average of the standard deviations
  of the assets in the portfolio. Fully explain your answer.
 
  What will be an ideal response?

Question 2

Which of the following ratios would be the most useful to assess the risk associated with a firm
  being able to pay off its short-term line of credit?
 
  A) the acid test ratio B) the fixed asset turnover
  C) the operating profit margin D) return on equity


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

tuate

  • Sr. Member
  • ****
  • Posts: 332
Reply #1 on: Jul 11, 2018
Answer to Question 1

The standard deviation of a portfolio is not a weighted average of the standard deviations of the assets in the portfolio.
If the portfolio is well-diversified then it should have a standard deviation that is lower than most or all of the assets
placed in that portfolio. Betas can be averaged, but standard deviations cannot, due to the diversifiable risk that is
contained in the standard deviation but not reflected by beta.

Answer to Question 2

A


go.lag

  • Member
  • Posts: 667
Reply 2 on: Jul 11, 2018
Gracias!

Liddy

  • Member
  • Posts: 342
Reply 3 on: Yesterday
Wow, this really help

« previous next »
 

Did you know?

Although the Roman numeral for the number 4 has always been taught to have been "IV," according to historians, the ancient Romans probably used "IIII" most of the time. This is partially backed up by the fact that early grandfather clocks displayed IIII for the number 4 instead of IV. Early clockmakers apparently thought that the IIII balanced out the VIII (used for the number 8) on the clock face and that it just looked better.

Did you know?

On average, someone in the United States has a stroke about every 40 seconds. This is about 795,000 people per year.

Did you know?

Hip fractures are the most serious consequences of osteoporosis. The incidence of hip fractures increases with each decade among patients in their 60s to patients in their 90s for both women and men of all populations. Men and women older than 80 years of age show the highest incidence of hip fractures.

Did you know?

Aspirin may benefit 11 different cancers, including those of the colon, pancreas, lungs, prostate, breasts, and leukemia.

Did you know?

Carbamazepine can interfere with the results of home pregnancy tests. If you are taking carbamazepine, do not try to test for pregnancy at home.

The nurse is using Standard Precautions to draw blood. The nurse is using Standard Precautions to draw blood.
Mars's average distance from the Sun is roughly 230 million km (1.5 AU) and its orbital period Mars's average distance from the Sun is roughly 230 million km (1.5 AU) and its orbital period
How to find the average value of a function (Part 2) How to find the average value of a function (Part 2)
Some Standard Shapes of Greek Vessels Some Standard Shapes of Greek Vessels
The temperature of an average lightning bolt is 3.0 x 104 °C. What is the equiva The temperature of an average lightning bolt is 3.0 x 104 °C. What is the equiva
Average quarterly presidential approval rating, from Eisenhower to Trump Average quarterly presidential approval rating, from Eisenhower to Trump
Video: What Are Carbohydrates? Importance of Carbs & High Carb Food

For a complete list of videos, visit our video library