Assignment Detail

Assignment ID: FG133051084

1.The Certainty Equivalent (CA) of a portfolio is:

a. The factor “A” in the utility function

b. The lowest possible rate of interest one can receives from a standard savings account

c The average of all available investments in the market

d. The return that a risk-free investment would offer that would make the investor indifferent between investing in the risk-free or the risky asset

e. The interest rate set by Central Banks

2.Given two securities with the following information, the weights of X and Y (respectively) in the minimum variance portfolio are: Security X: return = 10%, std dev = 16% Security Y: return = 8%, std dev = 12% Correlation coefficient = -1

a. 0.76 and 0.24

b.0.50 and 0.50

c.0.57 and 0.43

d. 0.43 and 0.57

e. 0.24 and 0.76

3.Diversification for a portfolio consisting of two assets is most effective when:

a. the securities’ returns are not correlated

b. the securities’ returns move in the same direction

c. the securities’ returns move in opposite directions

d. the securities’ returns are low

e. the securities’ returns are high