Identifying the Risk Contribution of an Asset to a Portfolio

question 2

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:

Fixed And Variable Cost

Costs that remain constant regardless of the level of production or sales (fixed), and costs that vary directly with the level of production or sales (variable).

Planning Budget

A budget based on the level of output planned at the start of the budgetary period.

Spending Variance

A financial metric that compares the actual amount spent on a specific item to the budgeted or expected amount.

Cost Formulas

Equations or models used to calculate the costs associated with manufacturing a product or delivering a service.