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Author Question: A highly risk-averse investor is considering adding one additional stock to a three-stock portfolio, ... (Read 93 times)

dusk108

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on: Aug 7, 2023

Question 1

Zero coupon bonds pay no coupons at all but are offered at their par values and hence provide capital appreciation rather than interest income.

◦ true
◦ false

Question 2

A highly risk-averse investor is considering adding one additional stock to a three-stock portfolio, to form a four-stock portfolio. The three stocks currently held all have b = 1.0 and a perfect positive correlation with the market. Potential new Stocks A and B both have expected returns of 20%, and both are equally correlated with the market, with r = 0.80. However, Stock A’s standard deviation of returns is 11% versus 15% for Stock B. Which stock should this investor add to their portfolio, or does the choice matter?

◦

either A or B, i.e., the investor should be indifferent as to which of the two


◦

Stock A


◦

Stock B


◦

neither A nor B, as neither has a return sufficient to compensate for risk

Financial Management: Theory and Practice ¦ Brigham, Ehrhardt, Gessaroli, Nason ¦ 4th Edition
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Marked as best answer by dusk108 on Aug 7, 2023

kyledifference

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Reply #1 on: Aug 7, 2023
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
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dusk108

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Reply 2 on: Aug 7, 2023
Gracias!

rachel

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Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

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