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Risk
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Risk

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Questions and Answers

What is a risk-free asset?

  • An asset with certain return and zero default risk (correct)
  • An asset with uncertain return and non-zero default risk
  • An asset with certain return and non-zero default risk
  • An asset with uncertain return and zero default risk

    • According to Markowitz (1952), what is the focus of portfolios?

  • Maximizing return while ignoring risk
  • Minimizing both risk and return
  • Maximizing risk and return simultaneously
  • Minimizing risk while maximizing return (correct)

    • What is the general definition of return?

  • The total of income stream and change in asset price (correct)
  • The change in asset price (capital gain/loss)
  • The difference between the amount received and the initial investment
  • The income stream associated with an investment

    • What does a risky asset entail?

    <p>Uncertain return and non-zero default risk</p> Signup and view all the answers

    How is a portfolio defined?

    <p>A collection of assets defined by portfolio weights</p> Signup and view all the answers

    In Modern Portfolio Theory, what is the primary focus in relation to risk and return?

    <p>Maximizing return while minimizing risk through diversification</p> Signup and view all the answers

    What is the distinguishing feature of a risk-free asset?

    <p>Certain return and zero default risk</p> Signup and view all the answers

    Which factor contributes to the total return of an investment?

    <p>Income stream and change in asset price</p> Signup and view all the answers

    What is the primary function of portfolio weights in defining a portfolio?

    <p>Determining the allocation of assets within the portfolio</p> Signup and view all the answers

    According to Markowitz (1952), what approach characterizes a risk-averse investor's focus on portfolios?

    <p>Balancing risk and return to achieve optimal portfolio diversification</p> Signup and view all the answers

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