A key insight in risk and return models in finance is that some risks are diversifiable...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A key insight in risk and return models in finance is that some risks are diversifiable and others are not. This is followed by the assumption that the marginal investor in the company is diversified. Assume that you know the proportion of stock held by different groups, how much trading they account for, and how much of the investor's portfolio is made of this particular company. Determine which group is most likely to contain the marginal investor? Investor Group A. Founder/Insiders B. Government C. Domestic mutual funds 20% D. Individual investors E. Foreign mutual funds % of stock held 15% 15% 20% 30% % of overall trading 15% 15% 20% 25% 25% % of Investors Portfolio 80% 5% 5% 70% 10% A key insight in risk and return models in finance is that some risks are diversifiable and others are not. This is followed by the assumption that the marginal investor in the company is diversified. Assume that you know the proportion of stock held by different groups, how much trading they account for, and how much of the investor's portfolio is made of this particular company. Determine which group is most likely to contain the marginal investor? Investor Group A. Founder/Insiders B. Government C. Domestic mutual funds 20% D. Individual investors E. Foreign mutual funds % of stock held 15% 15% 20% 30% % of overall trading 15% 15% 20% 25% 25% % of Investors Portfolio 80% 5% 5% 70% 10%
Expert Answer:
Answer rating: 100% (QA)
To determine which group is most likely to contain the marginal investor we need to compare the prop... View the full answer
Related Book For
Thermodynamics An Engineering Approach
ISBN: 978-0073398174
8th edition
Authors: Yunus A. Cengel, Michael A. Boles
Posted Date:
Students also viewed these finance questions
-
An introductory statistics instructor wants to know if the median number of hours that students talk on the phone per week is more than 15. He randomly sampled 20 students, asked them to record the...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Suppose you have the following training set, and fit a logistic regression classifier : ho(x) = g(00+011+0x2) O O O Which of the following are true? Check all that apply. a) Adding polynomial...
-
A 3-kg model rocket is launched vertically and reaches an altitude of 60 m with a speed of 28 m/s at the end of powered flight, time t = 0. As the rocket approaches its maximum altitude it explodes...
-
Prove that the order of the symmetric group of a set of $N$ elements, $S_{N}$, is $N$ !.
-
Holze Music Co. issued 5\%, 10 -year bonds payable at 75 on December 31, 2006. At December 31, 2009, Holze reported the bonds payable as follows: Holze uses the straight-line amortization method....
-
Hebert Company reported the following information for 2011: Repaid long-term debt ............. $50,000 Paid interest on note payable ............ 1,320 Issued common stock ............... 25,000...
-
Romance Scam are a scam artist and are looking to take advantage of a person online in an effort to defraud them of as much money as possible. In your pursuit of your criminogenic behaviour, you will...
-
A beam ABCD with a vertical arm CE is supported as a simple beam at A and D (see figure). A cable passes over a small pulley that is attached to the arm at E. One end of the cable is attached to the...
-
Investors need to know how much risk they have to take to confidently expect a certain percentage return. Likewise, managers want to know what? Return shareholders require so that they can decide how...
-
What effect does inadequate disclosure have on the auditor's report?
-
Assuming that in the multiplication of bacteria by fission (division into two bacteria) the probability of a bacterium dividing during a time interval \(\Delta t\) is equal to \(a \Delta t+o(\Delta...
-
What are the responsibilities of (a) the continuing auditor and (b) a predecessor auditor concerning comparative statements?
-
The probability that a molecule that collided with another molecule at time \(t=0\) and that did not experience any other collisions up to time \(t\) will experience a collision during the time...
-
What reporting requirements apply when the auditor wishes to emphasize a matter in his report?
-
The one year ahead forward rate for pesos is 7.05 pesos per dollar. What is the profit made (in dollars) if an investor agrees to buy 10,000 pesos at the forward rate and the future spot rate after a...
-
What is the mode?
-
R-134a, whose specific volume is 0.6243 ft3/lbm, flows through a tube at 80 psia. What is the temperature in the tube?
-
Air is accelerated as it is heated in a duct with negligible friction. Air enters at V1 = 100 m/s, T1 = 400 K, and P1 = 35 kPa and the exits at a Mach number of Ma2 = 0.8. Determine the heat transfer...
-
A stream of refrigerant-134a at 1 MPa and 20C is mixed with another stream at 1 MPa and 80C. If the mass flow rate of the cold stream is twice that of the hot one, determine the temperature and the...
-
The \(\operatorname{arm} O A\) of an epicyclic gear train shown in Fig. 106 below revolves counter-clockwise about \(O\) with an angular velocity of \(4 \mathrm{rad} / \mathrm{s}\). Both gears are of...
-
The lengths of the links of a 4-bar linkage with revolute pairs only are \(p, q, r\) and \(s\) units. Given that \(p
-
The mechanism used in a shaping machine is (a) a closed 4-bar chain having 4 revolute pairs (b) a closed 6-bar chain having 6 revolute pairs (c) a closed 4-bar chain having 4 revolute and 2 sliding...
Study smarter with the SolutionInn App