Expected Return, and Risk

A portfolio is:

• a group of assets, such as stocks and bonds, held as a collective unit by an investor.

• the expected return on a risky asset.

• the expected return on a collection of risky assets.

• the variance of returns for a risky asset.

The percentage of a portfolio's total value invested in a particular asset is called that asset's: 

• portfolio return

• portfolio risk

• portfolio weight

• rate of return

The principle of diversification tells us that:

• Spreading an investment across many diverse assets will eliminate some of the risk.

• Spreading an investment across many diverse assets will eliminate all of the risk.

• Spreading an investment across five diverse companies will not lower your overall risk at all.

• Concentrating an investment in three companies all within the same industry will greatly reduce your overall risk.

Which one of the following statements is correct concerning the expected rate of return on an individual stock given various states of the economy?

• The expected return is a geometric average where the probabilities of the economic states are used as the exponential powers.

• The expected return is an arithmetic average of the individual returns for each state of the economy.

• The expected return is a weighted average where the probabilities of the economic states are used as the weights.

• The expected return is equal to the summation of the values computed by dividing the expected return for each economic state by the probability of the state.

The portfolio expected return considers which of the following factors?

I. the amount of money currently invested in each individual security

II. various levels of economic activity

III. the performance of each stock given various economic scenarios

IV. the probability of various states of the economy

• I and III only

• II and IV only

• II, III, and IV only

• I, II, III, and IV

Which one of the following statements is correct concerning the standard deviation of a portfolio?

• The greater the diversification of a portfolio, the greater the standard deviation of that portfolio.

• The standard deviation of a portfolio can often be lowered by changing the weights of the securities in the portfolio.

• Standard deviation is used to determine the amount of risk premium that should apply to a portfolio.

• Standard deviation measures only the systematic risk of a portfolio.

Jazz is a music genre that originated in

• New Orleans

• New York City

• Havana

• Paris