Nonmonetary assets such as inventory or property,
plant, and equipment are items whose price may
change over time.
Ordinarily, companies account for the exchange of
nonmonetary assets on the basis of the fair value of
the asset gi
OPTIMAL RISKY PORTOFLIOS
DIVERSIFICATION AND PORTFOLIO RISK
Suppose you have in your risky portfolio only one stock, say Dell Computer
Corporation. What would be the sources of risk affecting this portfolio?
You might think of two broad sources of uncerta
Quick Note 3
1. Theoretically, the standard deviation of a portfolio can be reduced to what level?
Explain. Realistically, is it possible to reduce the standard deviation to this level? Explain.
Theoretically, if one could find two securities with perfect
Quick note: Index Model
Discuss the advantages of the single-index model over the Markowitz model in terms of
numbers of variable estimates required and in terms of understanding risk relationships.
For a 50 security portfolio, the Markowitz model require
Discuss the differences between the capital market line and the security market line.
The capital market line measures the excess return (return of the portfolio over the risk-free
return) per unit of total risk, as measured by standard deviation. The CML
An order in a market such as a stock market, bond market, commodity market, or
financial derivative market is an instruction from customers to brokers to buy or sell on the
exchange. These instructions can be simple or complicated. There
1. Market orders are to be executed immediately at the best prevailing price.
2. Limit-buy orders are to be executed if the market price decreases to the specified limit
3. Stop-loss orders are to be executed if the market price decreas