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A Risky Portfolio Is One That

question 130

Multiple Choice

A risky portfolio is one that:
I. is poorly diversified.
II. has a volatile stock in a basket of 200 stocks.
III. has a positive correlation between most of its stock prices.


Definitions:

Expected Rate

The anticipated rate of return on an investment, factoring in known variables and risk assessments.

Capital Market Line

A line in the risk-return space representing the risk-return combination available to investors from a risk-free asset and market portfolio of risky assets.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, often represented by the yield on government bonds.

Standard Deviation

Square root of the variance.

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