Identifying the Risk Contribution of an Asset to a Portfolio

question 8

Multiple Choice

Identifying the risk contribution of an asset to a portfolio is more difficult than identifying its return contribution because

• A)Risk does not always increase when you add assets to a portfolio.
• B)Risk,unlike return,is not additive.
• C)Risk is a property of portfolios,not one of individual assets.
• D)Some assets have no risk.

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Definitions:

Expected Value

The predicted value of a variable, calculated as a sum of all possible values each multiplied by the probability of its occurrence.

Unit Of Measure

A standard quantity used in measuring and expressing the quantity of an element, substance, or phenomenon.

Variance

A measure of the dispersion or spread of a set of data points around their mean value; it quantifies the degree to which these points differ from the mean.

Distribution Plans

Strategies or policies set by a company or organization for delivering goods or services to customers, encompassing logistics, transportation, and channels of distribution.