1. Which of the following is correct? A. Investors can reduce the risk in their
ID: 2683128 • Letter: 1
Question
1. Which of the following is correct?A. Investors can reduce the risk in their portfolio by investing in international stocks since they tend to have low correlation with our own stock market.
B. Combining both stocks and bonds will likely reduce risk in a portfolio because the two assets have low correlation.
C. Your optimal portfolio is an efficient portfolio with your desired risk level.
D. All of these statements are correct.
2. Which of these statements is true?
A. When people purchase a stock, they know exactly what their dollar and percent return are going to be.
B. Many people purchase stocks as they find comfort in the certainty for this safe form of investing.
C. When people purchase a stock, they know the short-term return, but not the long term return.
D. When people purchase a stock, they do not know what their return is going to be
Explanation / Answer
D. All of these statements are correct. C. When people purchase a stock, they know the short-term return, but not the long term return. C. computing the average beta per division, use these figures for each division in the CAPM formula, and then construct divisional WACCs. D. All of these statements are correct. B. Investor returns are reduced when float costs increase, therefore, float costs reduce the weighted average cost of capital.
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