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 24 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
:D TYSM

peter

  • Member
  • Posts: 330
Reply 3 on: Yesterday
Wow, this really help

« previous next »
 

Did you know?

Many people have small pouches in their colons that bulge outward through weak spots. Each pouch is called a diverticulum. About 10% of Americans older than age 40 years have diverticulosis, which, when the pouches become infected or inflamed, is called diverticulitis. The main cause of diverticular disease is a low-fiber diet.

Did you know?

The tallest man ever known was Robert Wadlow, an American, who reached the height of 8 feet 11 inches. He died at age 26 years from an infection caused by the immense weight of his body (491 pounds) and the stress on his leg bones and muscles.

Did you know?

Ether was used widely for surgeries but became less popular because of its flammability and its tendency to cause vomiting. In England, it was quickly replaced by chloroform, but this agent caused many deaths and lost popularity.

Did you know?

Thyroid conditions may make getting pregnant impossible.

Did you know?

When Gabriel Fahrenheit invented the first mercury thermometer, he called "zero degrees" the lowest temperature he was able to attain with a mixture of ice and salt. For the upper point of his scale, he used 96°, which he measured as normal human body temperature (we know it to be 98.6° today because of more accurate thermometers).

On average, the ratio of carbon to nitrogen is much higher in terrestrial plants than in other major On average, the ratio of carbon to nitrogen is much higher in terrestrial plants than in other major
Average optimal blood pressure for age Average optimal blood pressure for age
Summary of Standard Precautions Summary of Standard Precautions
a) Thumb pressure with radial deviation b) Alternating stroke using ulnar deviation a) Thumb pressure with radial deviation b) Alternating stroke using ulnar deviation
Average Hourly Earnings of U.S. Workers in Current and Constant Dollars Average Hourly Earnings of U.S. Workers in Current and Constant Dollars
Assume z is a standard normal random variable. What is the value of z if the area to the right ... Assume z is a standard normal random variable. What is the value of z if the area to the right ...
Video: Decubitus Ulcer

For a complete list of videos, visit our video library