Podcast
Play an AI-generated podcast conversation about this lesson
Questions and Answers
What is the primary purpose of a Monte Carlo simulation in financial analytics?
What is the primary purpose of a Monte Carlo simulation in financial analytics?
- To calculate the value-at-risk of a cryptocurrency investment
- To optimize the weightings of a diversified portfolio
- To estimate the expected return of a portfolio using the Capital Asset Pricing Model (CAPM)
- To generate random scenarios for sensitivity analysis of a portfolio (correct)
According to the Capital Asset Pricing Model (CAPM), what is the expected return of a portfolio?
According to the Capital Asset Pricing Model (CAPM), what is the expected return of a portfolio?
- The sum of the expected returns of individual assets
- The weighted average of the expected returns of individual assets (correct)
- The risk-free rate plus the market risk premium
- The beta of the portfolio times the market return
In a cryptocurrency portfolio, what is the primary benefit of diversification?
In a cryptocurrency portfolio, what is the primary benefit of diversification?
- Reducing the risk of the portfolio by offsetting losses (correct)
- Reducing the expected return of the portfolio
- Increasing the liquidity of the portfolio
- Increasing the volatility of the portfolio
What is the primary assumption of the Capital Asset Pricing Model (CAPM) regarding investor behavior?
What is the primary assumption of the Capital Asset Pricing Model (CAPM) regarding investor behavior?
Signup and view all the answers
What is the role of beta in the Capital Asset Pricing Model (CAPM)?
What is the role of beta in the Capital Asset Pricing Model (CAPM)?
Signup and view all the answers
