"Monotonicity" Is the Requirement of a Risk-Measure That If Portfolio

question 31

Multiple Choice

"Monotonicity" is the requirement of a risk-measure that if Portfolio A dominates Portfolio B (in the sense of always doing at least as well as B in every state of the world and strictly better in some states) ,then the risk of Portfolio A should be less than the risk of Portfolio B.Which of the following statements is correct?

• A)Standard deviation (SD)fails to satisfy monotonicity.
• B)Value-at-Risk (VaR)fails to satisfy monotonicity.
• C)Expected shortfall (ES)fails to satisfy monotonicity.
• D)All three of these portfolio risk-measures (SD,VaR,and ES)fail monotonicity.

Explain the EBIT-EPS analysis and its significance in assessing different leverage levels.

Comprehend the relationship between financial leverage and Earnings per Share (EPS) sensitivity.

Identify and interpret the breakeven point in breakeven analysis.

Understand the relationship between operating leverage and financial leverage.

---

Definitions:

Erikson

A reference to Erik Erikson, a developmental psychologist known for his theory on the psychosocial development of humans.

Crisis Resolution

The process of addressing an emergency or critical situation in a manner that resolves the immediate problem and restores stability.

Recency Effect

The tendency to remember the most recently presented information better than information that was presented earlier.

Perceptual Distortion

A cognitive bias that affects the way we perceive reality, often leading to misconceptions or inaccurate judgments.