Asset Allocation Refers to the _________

question 45

Multiple Choice

Asset allocation refers to the _________.

• A) allocation of the investment portfolio across broad asset classes
• B) analysis of the value of securities
• C) choice of specific assets within each asset class
• D) none of the answers define asset allocation

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Definitions:

CAPM

The Capital Asset Pricing Model, a formula used to determine the expected return on an investment, factoring in risk and the time value of money.

Nonsystematic Variance

Nonsystematic variance, also known as unsystematic risk, is the portion of an investment's risk that is attributable to the specific risk of its issuer and can be mitigated through diversification.

Security Market Line

A graphical representation of the capital asset pricing model, showing the expected return of an investment as a function of its systemic risk.

Nonsystematic Risk

The risk associated with an individual asset or investment, resulting from factors specific to its issuer's performance and not the broader market.