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Sophia
Principles of Finance
Milestone 3
1
Which of the following is true of portfolio diversification?
A diversified portfolio containing positively correlated investments has a higher variance than a
portfolio containing a single asset type.
A diversified portfolio containing negatively correlated investments has a lower variance than a
portfolio containing a single asset type.
A diversified portfolio containing positively correlated investments has a lower variance than a
portfolio containing a single asset type.
A diversified portfolio containing negatively correlated investments has a higher variance than a
portfolio containing a single asset type.
CONCEPT
Portfolio Considerations
2
A security that falls below the security market line has __________.
a high expected return and a high price
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a low expected return and a high price
a low expected return and a low price
a high expected return and a low price
CONCEPT
Understanding the Security Market Line
3
You own a small manufacturing business that produces widgets. You have spent $100,000
acquiring the fixed assets you need to produce widgets. Each widget costs you $4 to make and
they sell for $22 each, so your variable cost is 18.2% of the overall revenue.
At your current level of operating leverage, how many widgets must you sell to break even?
4,546
18,200
5,556
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Sophia
Principles of Finance
Milestone 3
1
Which of the following is true of portfolio diversification?
A diversified portfolio containing positively correlated investments has a higher variance than a
portfolio containing a single asset type.
A diversified portfolio containing negatively correlated investments has a lower variance than a
portfolio containing a single asset type.
A diversified portfolio containing positively correlated investments has a lower variance than a
portfolio containing a single asset type.
A diversified portfolio containing negatively correlated investments has a higher variance than a
portfolio containing a single asset type.
CONCEPT
Portfolio Considerations
2
A security that falls below the security market line has __________.
a high expected return and a high price
Downloaded by: Ariah |
Distribution of this document is illegal
, Stuvia.com - The Marketplace to Buy and Sell your Study Material
a low expected return and a high price
a low expected return and a low price
a high expected return and a low price
CONCEPT
Understanding the Security Market Line
3
You own a small manufacturing business that produces widgets. You have spent $100,000
acquiring the fixed assets you need to produce widgets. Each widget costs you $4 to make and
they sell for $22 each, so your variable cost is 18.2% of the overall revenue.
At your current level of operating leverage, how many widgets must you sell to break even?
4,546
18,200
5,556
Downloaded by: Ariah |
Distribution of this document is illegal
