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Does the Diversification require regular evaluating the assets
and realigning the investment mix? How? Give an example?
Step by step
Solved in 2 steps
- Describe the principles of asset valuation. Distinguish between the required rate of return and expected rate of return. Based on the asset valuation, how do the investors make investment decisions using the required rate of return?Which is the most accurate and commonly-used Investment Appraisal Method?How can we reduce investment risks by asset diversification?
- Combining two or more assets in an investment portfolio will typically lead to diversification benefits.(i) What is the benefit of diversification?(ii) What is the general condition under which diversification will have benefits? Briefly explain why.How do investors reduce investment risk by asset allocation and diversification?1. How to compare different assets in investment selection process? 2. What are the quantitative characteristics of the assets and how to measure them? 3. How does one asset in the same portfolio influence the other one in the same portfolio? 4. And what could be the influence of this relationship to the investor’s portfolio? 5. What is relationship between the returns on an asset and returns in the whole market (market portfolio)?
- Explain the meaning and composition of the "return" of a financial investment.why net present value is considered to be superior to internal rate of return as an investment appraisal method? Critically evaluate and give an example if possibleWhich of the following are the key factors when determining asset allocation for an investment? I. Time an investor has until he needs to use the money from the investment (time horizon) II. Risk preferences (tolerance for risk) III. Current financial situation a. I., II., & III. b. I. & III. c. II. & III. d. I. & II.