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1 - Diversification: True or False. Explain your answer. The variances of the in

ID: 2647904 • Letter: 1

Question

1 - Diversification: True or False. Explain your answer.                                       

The variances of the individual assets in the portfolio are the most important characteristic in determining the expected return of a well-diversified portfolio.

2 - If a portfolio has a positive investment in every asset, can the standard deviation on the portfolio be less than that on every asset in the portfolio? Explain.          

3 - If a portfolio has a positive investment in every asset, what about the portfolio beta? Is the portfolio beta less than that of every asset in the portfolio?Explain.          

Explanation / Answer

ANSWERS:

1. False

2. True.

3. True.

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