ESSENTIALSOFINVESTMENTS b b
CHAPTER 6 QUESTIONS WITH CORRECT
b b b b b
ANSWERS2024-2025
b b
marke, systematic, nondiversiable risk - correct answer-risk factors common to the whole economy
b b b b b b b b b b b b
unique, firm-specific, nonsystematic, diversiable risk - correct answer- risk
b b b b b b b b
that can be eliminated by diversification (4 names)
b b b b b b b b
investment opportunity set - correct answer-set of available portfolio risk-return combinations
b b b b b b b b b b
optimal risky portfolio - correct answer-
b b b b b
the best combination of risky assets to be mixed with safe assets to form the complete portfolio
b b b b b b b b b b b b b b b b
efficient frontier - correct answer- b b b b
graph representing a set of portfolios that maximizes expected return at each level of portfolio risk
b b b b b b b b b b b b b b b
seperation property - correct answer- b b b b
the property that implies portfolio choice can be seperated into two independent tasks: (1) determina tion of
b b b b b b b b b b b b b b b b
the optimal risky portfolio, which is a purely technical problem, and (2) the personal choice of the best mix of
b b b b b b b b b b b b b b b b b b b b
the risky portfolio and the risk-free asset
b b b b b b b
index model - correct answer-
b b b b
model that relates stock returns to returns on both a broad market index and firm-specific factors
b b b b b b b b b b b b b b b
excess return - correct answer-rate of return in excess of the risk-free rate
b b b b b b b b b b b b
beta - correct answer-the sensivity of a security's returns to the market factor
b b b b b b b b b b b b
firm-specific or residual risk - correct answer- b b b b b b
component of return variance that is independent of the market factor
b b b b b b b b b b
CHAPTER 6 QUESTIONS WITH CORRECT
b b b b b
ANSWERS2024-2025
b b
marke, systematic, nondiversiable risk - correct answer-risk factors common to the whole economy
b b b b b b b b b b b b
unique, firm-specific, nonsystematic, diversiable risk - correct answer- risk
b b b b b b b b
that can be eliminated by diversification (4 names)
b b b b b b b b
investment opportunity set - correct answer-set of available portfolio risk-return combinations
b b b b b b b b b b
optimal risky portfolio - correct answer-
b b b b b
the best combination of risky assets to be mixed with safe assets to form the complete portfolio
b b b b b b b b b b b b b b b b
efficient frontier - correct answer- b b b b
graph representing a set of portfolios that maximizes expected return at each level of portfolio risk
b b b b b b b b b b b b b b b
seperation property - correct answer- b b b b
the property that implies portfolio choice can be seperated into two independent tasks: (1) determina tion of
b b b b b b b b b b b b b b b b
the optimal risky portfolio, which is a purely technical problem, and (2) the personal choice of the best mix of
b b b b b b b b b b b b b b b b b b b b
the risky portfolio and the risk-free asset
b b b b b b b
index model - correct answer-
b b b b
model that relates stock returns to returns on both a broad market index and firm-specific factors
b b b b b b b b b b b b b b b
excess return - correct answer-rate of return in excess of the risk-free rate
b b b b b b b b b b b b
beta - correct answer-the sensivity of a security's returns to the market factor
b b b b b b b b b b b b
firm-specific or residual risk - correct answer- b b b b b b
component of return variance that is independent of the market factor
b b b b b b b b b b
