Chapter 6 In Class Flashcards
1
Q
market risk is the same thing as
A
systematic risk
2
Q
market risk/systematic risk are non-diversifiable risks?
A
True
3
Q
Names for diversifiable risks?
A
Unique/Firm-Specific/Non-systematic
4
Q
Covariance=
A
average of the products of the deviations
5
Q
When you put a negative beta with a positive beta, what happens to risk?
A
It goes down
6
Q
If two assets have perfectly positive correlation there is no?
A
risk reduction
7
Q
Optimal Risky Portfolio
A
Best combination of risky and safe assets to form portfolio
8
Q
Where on the graph is the optimal risky portfolio.
A
Where the capital allocation line is tangent to the marcos line of all the assets showing expected return and standard devision (risk)
9
Q
Do we want to be inside the marco line?
A
No we want to be on the line. That is optimal
