Question
As the number of stocks in a portfolio increases, the
portfolio’s systematic risk:Solution
Systematic risk is risk which affects all and cannot be mitigated or avoided. This is the kind of risk that applies to an entire market or market segment. It is also known as un-diversifiable risk or market risk . As such the portfolio’s systematic risk can be increased by adding higher-risk stocks or decreased by adding lower-risky stocks. When we add more stocks to a portfolio, unsystematic risk (i.e. diversifiable risk) will decrease at a decreasing rate.
Which policy tool is more effective under a fixed exchange rate regime according to the Mundell-Fleming Model?
Consider an economy described by the following equations:
C = 100 + 0.6 ∗ (Y − T) (consumption function)
I = 200 − 10...
When two regression coefficients bear same algebraic signs, then correlation coefficient is:
The Harrod-Domar Growth Model emphasizes the importance of saving and capital accumulation for economic growth. The model concludes that the rate of out...
Suppose the relationship between Y and two explanatory variables in true model is Yi = 5+2.4X1i-3.5X2i + ei . What is the value of beta(1) in the regres...
A monopolist sells its product in two separate markets with different price elasticities of demand. The marginal cost of production is constant at $20 p...
An unbiased coin is tossed until a head appears. The expected number of tosses required is
For an economy, if C = 400 + 0.8Yd, Yd = Y − T, T = 300 + 0.2Y , find MPC.
At point A, inflation is equal to the underlying rate of inflation and output is at the level of output consistent with the equilibrium unemployment rat...
New loans made = 1000. Fractional reserve ratio is 1/3, by how much deposits will grow?
