Risk and Return in a Portfolio
13 important questions on Risk and Return in a Portfolio
What is a portfolio?
What is diversification of profits?
What is an efficient frontier?
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What is the minimum variance point of the efficient frontier curve?
What is a risk-free security?
What is a risk-free rate?
What is the Capital Market Line?
What is the market return in the efficient frontier model?
What is the separation property?
What are the 2 different types of risk?
2. Unsystematic risk/ unique risk - type of risk specifically to an investment in a particular sector, e.g. investment in restaurants and regulation for food.
What 2 parts does the return on a share consist of according tot the CAPM?
2. Risk taken, (measure of risk x (return on market portfolio - risk-free rate))
What does the beta in the CAPM model indicate?
- Beta lower than 1: less risky
- Beta equal to 1: medium risk
- Beta higher than 1: riskier
What is the security market line?
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