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A collection of financial assets and securities is referred to as a portfolio. Most individuals a analysis an integral part of finance. Just like standalone assets and securities, portfolilos are also exposed to risk. possibility that an investment portfolio will not generate the expected rate of return. d institutions invest in a portfolilo, making portfolio risk Portfolio risk refers to the Analyzing portfollo risk and return involves the understanding of expected returns from a portfolio Consider the following case: Sam is an amateur investor who holds a small portfolio consisting of only four stocks. The stock holdings in his portfoli table: Stock Artemis Inc. Babish & Co. Cornell Industries Danforth Motors Percentage of Portfolio Expected Return standard Deviation 20% 30% 35% 15% 6.00% 14,00% 13.00% 5.00% 23.00% 27.00% 30.00% 32.00% Consider the following case Sam is an table: amateur investor who holds a small portfolio consisting of only four stocks. The stock holdings in his portfolio are shown in the following stockPercentage of PortfolioExpected Return Standard Deviation Artemis Inc. Babish & Co Cornell Industries Danforth Motors 20% 30% 35% 15% 6.00% 14.00% 13.00% 5.00% 23.00% 30.00% 32.00% The expected return on Sam's stock portfolio is Suppose each stock in the preceding portfolio has a the risk (standard deviation) of the Individual securities in the partialily dive p) most likely is correlation coefficient of 0.4 (-0.4) with each of the other stocks. r the weighted average of artially diversified portfolio of four stocks is 20%, the portfolio's standard deviation ( 28%. A stock's contribution to the market risk of a well-diversified portfollio is called (CAPM), this risk can be measured by a metric called the beta coefficient, which calculates the degree to which a stock moves with the movements in the market drisk. According to the Capitel Asset Pricing Model Based on your understanding of the beta coefficient, indicate whether each statement in the following tabie is true or false True False Statement Stock A's beta is 1.0; this means that the stock has a negative correlation with the marketOe Beta coefficients are generally calculated using historical data. Higher-beta stocks are expected to have higher required returns According to the Capital Asset Pricing Model k can be measured by a metric called the beta coefficient, whidegree to which a stock moves with the movements in A stock's contribution to the market risk of a well-diversified portfolio is called (CAPM), this ris unsystematic the market. systematic Based on your understanding of the beto coefficient, indicate whether each storemen oe ollowing table is true or false Statement Stock A's beta is 1.0; this means that the stock has Beta coefficients are generally calculated using historical data Higher-beta stocks are expected to have higher required returns. True False a negative correlation with the market. O

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