Investment Planning Global Chapter 3

“—– refers to the probability that our return may be different from what we anticipate.

“—– it refers to factors that affect the overall economy or securities markets.

_____is associated with a specific company, industry or investment product

Mr H has a well-diversified portfolio, where he has domestic equity, international equity, sector equity, corporate bond, U.S. treasury bond and real estate, and believes that with this he can eliminate all type of risk, but which of the following cannot be reduced even after diversification.

Mr A has corporate bond of 8.5%p.a. coupon rate payable half yearly, with 5 years to maturity but after 3 years interest rate in market falls to 7% and company decide to call the old (8.5% p.a. coupon) bond and issue new bonds at lower rate, thus Mr. A is exposed to which risk here:

Mr M has a goal to retire after 25 years, and for same he invest in fixed interest rate bond, to which of the following risk he is exposed.

Inflation risk is highest in:

If one British pound sterling (GBP) equaled 150 Japanese yen (JPY) and an individual in the UK were to invest £1,000 in a Japanese investment fund, the individual’s investment would be valued at ¥150,000. If the British pound appreciates against the Japanese yen so that one pound equals 165 yen, and the individual needs money, the investment would now be worth only £909.09. What risk will the investor suffer.

—– comes from shocks generated within the financial system.

Mr M invested in equity of a company and due to the news of falling sales, the price of stock falls, which risk is refered here

Mr Y is willing to invest in stocks of SK Ltd., but is worried about the possibility tahat business will have a downturn and how the management will function and handle company issues. What type of risk factor are referred here:

Mr O invested in stock of JK Ltd. but the company has large amount of debt in its capital ,this increase which of the following risk?

Mr W invested on corporate bonds of a company but is worried about what if the company fail to make interest and principal payment when due. Which risk he is concerned about?

—-is the degree to which an investment’s return is expected to vary from its mean return

—- equals the correlation coefficient of the two assets multiplied by their standard deviations.

MR M has a equity portfolio of two stocks A and stock B and they have a positive covariance what does it interpret?

Calculate the correlation between two securities if covariance between them is 0.00425 and standard deviation of two securities is 12% and 9%

—–indicates, the percentage of a fund’s performance that is explained by movements of its benchmark index or another security.

—- refers to the covariance of the stock and the market divided by the variance of the market.

—- is a measure of systematic risk.

“— is a measure of total risk.

—- is equal to the return on portfolio, less the risk-free return, divided by the standard deviation.

—- is equal to the return on portfolio, less the risk-free return, divided by the beta.

—– the Sharpe ratio, —– the risk-adjusted performance.

—– the Treynor ratio, —– the risk-adjusted performance.

Mr s wants to know the relationship between standard deviation and variance which of the following statement is correct?

Mr K invested in corporate bond @ 9% p.a. coupon rate payable semi-annually of 5 year maturity, but after 2 years the interest rate in market rise to 10%, Mr K wants to know the impact of increase interest rate on bond price.

Mr K an investor is considering two funds : BETA Fund A 1.2 | Fund B .75 |Which fund has lower volatility than market?

Mr T invested in stock A and stock B and correlation between them is 1, can he get the diversification benefit?

Diversification will not normally mitigate systematic risk, but it can help with non-systematic risk.

“—- is an investment’s compound rate of return over a period of time.