Problem: Please help answer the following problems. Provide explanations for each.
Markowitz's main contribution to portfolio theory is:
a. that risk is the same for each type of financial asset.
b. that risk is a function of credit, liquidity and market factors.
c. risk is not quantifiable.
d. insight about the relative importance of variances and covariances in determining portfolio risk.
If interest rates are expected to rise, you would expect:
a. bond prices to fall more than stock prices
b. bond prices to rise more than stock prices
c. stock prices to fall more than bond prices
d. stock prices to rise and bond prices to fall
A firm has net income of $1 million with 250,000 shares outstanding with a total market value of $16 million. What is its P/E ratio?
a. 64
b. 4
c. 32
d. 16