In a Portfolio,risk Is Evaluated in a Different Way Than

question 39

Multiple Choice

In a portfolio,risk is evaluated in a different way than with an individual project.In evaluating portfolio risk we:

• A) need to consider the impact of a given project on the overall risk of the firm.
• B) recognize that a risky investment always creates a portfolio with less risk.
• C) need to ensure all the projects in the portfolio are positively correlated.
• D) only consider the average beta.

---

Definitions:

Exercise Price

The specified price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying security or commodity.

Option Price

The cost at which an option's holder has the right to purchase (for a call option) or sell (for a put option) the underlying asset or commodity.

Market Value

The present rate at which a service or asset is available for purchase or sale in the market.

Equity

The value of an asset after deducting the amount of all liabilities on that asset. In investing, it often refers to the ownership interest held by shareholders in a corporation.