Question

you should fill in all of the boxes that are shaded in green (Please note there are two questions below that also need to be answered): Scenario 1: Weighted 30% Tesla, 20\% IBM, 20\% GE, and 30\% Amazon Scenario 2: Weighted 10\% Tesla, 20% IBM, 20\% GE, and 50% Amazon 1) Did the portfolio risk increase or decrease between scenarios 1 and 2 ? 2) Provide a brief explanation of why did the portfolio risk increase or decrease?

Answer 1

The portfolio risk increased between scenarios 1 and 2 due to the higher weights assigned to Tesla and Amazon.

Step-by-step explanation:

1) The portfolio risk increased between scenarios 1 and 2.

2) The portfolio risk increased because the weights assigned to Tesla and Amazon increased in scenario 2. Since Tesla and Amazon have higher levels of volatility compared to IBM and GE, their higher weights contributed to an overall increase in portfolio risk.