Few rational investors hold portfolios of assets, and they are more concerned with the risk of their portfolios than with the risk of individual assets.true or false
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Few rational investors hold portfolios of assets, and they are more concerned with the risk of their portfolios than with the risk of individual assets.true or false
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- Investors do not get compensated for holding on to diversifiable risk. True Falseany risk attached to a financial asset should not be considered when making an investment decision because all financial assets are risky. true or false?1. Which of the following statements is false? a. Risk neutrality means that an investor are not looking at risk in an investment, just returns. b. Risk aversion means that an investor prefer a fixed amount with certainty over a larger amount with risk. c. Risk seeking means that an investor is willing to accept the higher risk that goes with higher payoff. d. All of the above are false. e. None of the above are false.
- Risk is the potential for an investment to generate more than one return. A security that will produce only one known return is referred to as a risk-free asset, as there is no potential for deviation from the known expected outcome. Investments that have the chance of producing more than one possible outcome are called risky assets. Risk, or potential variability in an investment’s possible returns, occurs when there is uncertainty about an investment’s future outcome, such as the return expected to be generated by the investment and realized by an investor. You invest $100,000 in 40 stocks, 20 bonds, and a certificate of deposit (CD). What kind of risk will you primarily be exposed to? Stand-alone risk Portfolio risk Generally, investors would prefer to invest in assets that have: a high level of risk and low expected returns. a low level of risk and high expected returns.Systematic risk is diversifiable, so it is an investment's relevant risk. Unsystematic risk is O True FalseWhich one of the following statements is correct concerning unsystematic risk? An investor is rewarded for assuming unsystematic risk. Beta measures the level of unsystematic risk inherent in an individual security. Eliminating unsystematic risk is the responsibility of the individual investor. Standard deviation is a measure of unsystematic risk. Unsystematic risk is rewarded when it exceeds the market level of unsystematic risk. оо O O
- The role of management's intent increases the risk of material misstatement re: the Existence assertion for financial investments. Question options: True FalseIn a few sentences, answer the following question as completely as you can. We routinely assume that investors are “risk-averse return-seekers” (i.e., they like returns and dislike risk). If so, why do we contend that only systematic risk is important? Alternatively, why is total risk, on its own, not important to investors?Someone who is risk neutral A. does not care about an asset's risk B. places a value on an asset equal to its expected expected value OC. is indifferent between a risk-free asset and a risky asset with the same expect value OD. all of the above OE. none of the above
- in broad terms, why are some risks diversifiable? Why are some risks non- diversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic risk? Substantiate your answer with real world examplesWhy are investors risk-averse? How can investors deal with different degrees of risk?How can an investor eliminate Unsystematic Risk?