Examlex

Solved

The Overall Variability of a Firm's Returns Depends on the Expected

question 44

True/False

The overall variability of a firm's returns depends on the expected return of each individual project, the percentage of funds invested in each individual project, and the correlation coefficient of returns between the investments.


Definitions:

Beta

An indicator of the level of fluctuation, or inherent risk, of an asset or collection of assets relative to the overall market.

Zero-Investment Portfolio

A portfolio of zero net value, established by buying and shorting component securities, usually in the context of an arbitrage strategy.

Positive Expected Return

A projection that an investment will yield a return above the initial outlay.

Risk-Free Arbitrage

The practice of profiting from price differences in different markets or forms without risk.

Related Questions