Portfolio theory tends to define risky investments in terms of just two factors: expected returns and variance
Question:
Portfolio theory tends to define risky investments in terms of just two factors: expected returns and variance (or standard deviation) of those expected returns.
What assumptions need to be made about investors and the expected investment returns (one assumption in each case) to justify this ‘two-factor’ approach? Are these assumptions justified in real life?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 100% (1 review)
It needs to be assumed that returns are symmetrically distributed ar...View the full answer
Answered By
Muhammad Umair
I have done job as Embedded System Engineer for just four months but after it i have decided to open my own lab and to work on projects that i can launch my own product in market. I work on different softwares like Proteus, Mikroc to program Embedded Systems. My basic work is on Embedded Systems. I have skills in Autocad, Proteus, C++, C programming and i love to share these skills to other to enhance my knowledge too.
3.50+
1+ Reviews
10+ Question Solved
Related Book For
Question Posted:
Students also viewed these Business questions
-
We do not often realize it but we are constantly using statistical analysis Drawing graphs and charts calculating averages and other metrics is what is done most of the time but things like...
-
Portfolio theory tends to define risky investments in terms of just two factors: expectedreturns and variance (or standard deviation) of those expected returns. What assumptions need to be made about...
-
Northern Virginia Community College HOW MUCH FINANCIAL RISK SHOULD YOU TAKE? Mark D. D'Antonio Nova Southeastern University FORT LAUDERDALE, FLORIDA, U.S.A. Abstract A successful retirement...
-
Strike Bowling installs automatic scorekeeping equipment with an invoice cost of $180,000. The electrical work required for the installation costs $8,000. Additional costs are $3,000 for delivery and...
-
How does the financial system-both financial markets and financial intermediaries-provide risk sharing, liquidity, and information to savers and borrowers?
-
The electrically neutral metal rod in Figure P22.21 stands between two charged pith balls, and then a negatively charged rubber rod is scraped along the center of the metal rod. Draw the free-body...
-
A rooftop solar hot water heater with collector areas of \(8 \mathrm{~m}^{2}\) and storage of \(640 \mathrm{~L}\) is installed in Phoenix, Arizona, on a house that uses \(160 \mathrm{~L} /\) day of...
-
ROI, RI, EVA and Performance Evaluation. Eva Manufacturing makes fashion products and competes on the basis of quality and leading-edge designs. The company has $3,000,000 invested in assets in its...
-
A horizontal force, F, pushes a box up the edge of a square-based pyramid (length = R = 2 cm) from point U to point T. The pyramid has a base length = Q = 1 cm. The direction of the force is along...
-
WorldCom revealed that in addition to the US$3.8bn in expenses improperly recorded as capital, an internal audit discovered that US$3.3bn in profits were improperly recorded on its books from 1999 to...
-
Easton Ltd needs to purchase a machine to manufacture a new product. The choice lies between two machines (A and B). Each machine has an estimated life of three years with no expected scrap value....
-
A project will yield one of three NPVs whose amount and probabilities of occurrence are as follows: What is the expected NPV of the project and its variance? NPV CH - 1,000 +1,000 +2,000 Probability...
-
Deive signed a contract for membership in a physical fitness program. The contract provided that he was obligated to make payments whether he participated in the program or not. Deive had a lung...
-
Included in government research grants to universities are indirect cost payments designed to compensate for the researchers' use of the schools' facilities. Stanford University received...
-
At the turn of the millennium, Zappos, a Las Vegasbased Internet retailer, was a start-up struggling to survive. The company wanted to be the online destination for buying shoes, but customers...
-
Water is to be cooled at the rate of \(10 \mathrm{~kg} / \mathrm{s}\) from \(317 \mathrm{~K}\) to \(300 \mathrm{~K}\) in a countercurrent cooling tower under conditions such that \(H_{t O G}=2.5...
-
Repeat Example 9.2, but with a feed pressure of 5.0 MPa. Compare your results to those obtained at a feed pressure of 1.0 \(\mathrm{MPa}\). Data From Example 9.2:- Air can be separated into...
-
Aran Sweaters Ltd designs and markets wool jumpers to many retailers and distributors around Europe. Its corporate headquarters are situated in Dublin, Ireland. Manufacturing is done by a...
-
Omniportal Company purchased Network Enterprises. The following fair values were associated with the items acquired in this business acquisition: The fair value associated with Network Enterprises...
-
(a) As Section 17.3 discusses, high-frequency sound waves exhibit less diffraction than low-frequency sound waves do. However, even high-frequency sound waves exhibit much more diffraction under...
-
At the close of share trading on 19 February 2018, investment ratios for Next plc, the UK fashion and textiles retailer, and the averages for the general retailers section, were as follows: Required:...
-
For the current year, the average settlement period for trade receivables at Arkle plc was 60 days. This figure is much higher than in previous years. What factors may have contributed to this change...
-
The financial statements for Harridges Ltd are given below for the two years ended 30 June 2017 and 2018. Harridges Limited operates a department store in the centre of a small town. Dividends were...
-
Read the case study and answer the following question. If you were Rita Sheldon, how would you handle the performance appraisal meeting with Fred Young? Name at least 3 things you would say to...
-
As part of an HR team, persuasion plays a big role when developing positive practices and procedures for a company. "Persuasion is defined as the act or process of moving others toward a particular...
-
How do organizations support in uncertain decisions? Present a hypothetical scenario displaying under the four rhetorical principles in Quattrone's governance framework. Demonstrate the level of...
Study smarter with the SolutionInn App