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As one adds more assets to a portfolio in order to achieve diversification, what will happen to the portfolio’s risk?
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- If you introduce a risk free asset in your portfolio of risky assets; how will this change the shape of the opportunity? What are the main implications with respect to portfolio theory?How to construct Portfolio of different risk levels, given information about the risk-free rate and the returns on risky assets? What is a systematicrisk? How can we diversify risk efficiency?Which are the different assets that have the potential to be combined efficiently in a portfolio that will provide an optimal risk-return relationship for investors?
- How does the creation of a portfolio reduce risk? What type of assets should be included in a diverse portfolio? Why should they be included?Is there a relationship between risk and return in building an effective portfolio?(explain)How do an investment's required rate of return vary with perceived risk? Explain with an example?
- Explain the unique risk and the market risk. What risk can be reduced when you diversify your portfolio by investing across many different assets?What does it mean that portfolio diversification can reduce risk, and how does the efficient frontier logically fit into this discussion? include correlation, asset allocation, and asset classes or benchmarks in your answer.What is the expected return on a portfolio? How can the expected return on a portfolio be manipulated to minimize the risk on that portfolio? Justify your answer.
- Critically discuss the effect of diversification on portfolio risk. Is there any limit of diversification?What is the expected return on a portfolio? How can the expected return on a portfolio be manipulated to minimize the risk on that portfolio?What statistical concept do many portfolio managers use to represent a risk when considering investment performance?