Analyzing portfolio return questions
46 FUNDAMENTALS OF FINANCIAL MANAGEMENT
2. What is portfolio return?
• It is the weighted average of expected returns from different investments in the
portfolio. In terms of an equation:
X P = A A WA A BWB
3. What is risk? How is it measured?
• Risk is volatility in returns. It is shown by variance or standard deviation. Standard
deviation is the square root of variance. In terms of an equation:
σ 2 (Var.) =
Px(Ax – A ) 2
4. What is portfolio risk?
• Portfolio risk is the weighted average of risk present in different investments in
the portfolio. In terms of an equation:
σ p = [w1
2 Var A1 w22 Var A2 2(w1) (w2) (Cov A1, A2 )] 1/2
5. What is co-variance?
• It is the relationship between the movement of two sets of returns. In terms of an
Cov(A1, A2) =
P t(A1t – A 1 ) (A2t – A 2)
6. What is correlation co-efficient?
• It is the co-variance divided by the product of standard deviation of two sets of
returns. In form of an equation:
7. Distinguish between systematic and unsystematic risk.
• Systematic risk, shown through beta, represents risk of the total market portfolio.
Unsystematic risk is the firm-specific risk. While the latter can be reduced through
diversification, the former cannot be.
8. What is Beta?
β = σ
9. How is the required rate of return of a particular investment computed?
A1 = Af
β1( A M – Af)
10. What is security market line?
• It is the line joining the risk-free returns with the returns from risky investments
in the mark
Having a hard time figuring out how to do your assignment?
Ask our experts for help and get it done in no time!
The list is limitless. Research, term papers, dissertations, thesis, editing — all options are included. Even if you have a unique type of task, our writers are creative and meticulous enough, and they know how to take care of it. The following specific types of services are what our clients require most often.
You plan to apply to a college or a uni of your dreams and need a clever, engaging essay that’ll stand out? You’ll get it. It’s great if you have some specific ideas! They’ll be incorporated into the text. If you don’t, it’s not an issue. The writer will do an outstanding job anyway.
Choosing credible sources and proving why they’re relevant can be a long and tedious process. OurA writers are ready to do it for you.
Do you want a concise and catchy speech? It’s not a problem. “Do my homework” is the request we are waiting for.
Our writers have excellent design skills. They’ll provide you with a vivid and insightful PowerPoint presentation interesting for professors and classmates.
Every paper we deliver is customized. To guarantee its originality, we double-check every essay with our in-house plagiarism-detection software.
Our experts will edit your paper for free if you notice any flows within it. Apply for revision if you want to change anything in your essay.
In case of any discrepancies between our promises and the results you get, apply for a refund and get a full or partial reimbursement.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more