1) Define what is meant by the risk-return tradeoff? a. The lower the level of r

Question

1) Define what is meant by the risk-return tradeoff? a. The lower the level of risk an investor takes the higher his returns will be b. If an investor has a portfolio with a Beta of 0.8 then this investor would expect to receive the return of the portfolio plus an additional 80% If an investor has a portfolio with a Beta of 0.8 it is considered to be a highly volatile portfolio A prudent investor seeks to achieve the highest return possible while taking the lowest possible level of risk c. d. If you had $100,000 to invest, what would be the benefit of investing in 20 corporations versus 1 company? 2) . I don't have $100,000 to invest so this question does not make sense . If I had $100,000 to invest I would go to the casino and bet it all on black c. Investing in 20 corporations would allow me to spread out my risk d. More money more problems 3) The process of spreading out risk as described in the previous question is called: a, Return b. Volatility c. Alpha d. Beta Diversification 4) Which of the following is not a benefit of investing in financial assets? a. Low time commitment b. No expertise needed c. Unlimited Liability d. Easy to enter/exit e. Continuous valuation of your wealth 5) A private placement a. occurs when an investor purchases an allocation of a stock at an IPO b. occurs at the money market c. is only available to a limited number of purchasers d. is executed on a stock exchange

Explanation / Answer

1. Risk return tradeoff means the higher the investor is willing to take risk, the higher will be his return.

The correct option is (d). A prudent investor will always try to maximise its return with lowest possible risk.

2. By diversifying the investments, risk is spread out .

Correct option is (C). risk is spread out.

3. Spreading out risk means, Diversification. Option (e)

4. (c)....There is no unlimited liability, the liability is only limited to the invested amount.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.