Economics Homework Help

Part 1

A client has asked you to explain your suggestion of investing in a portfolio of 10 securities, rather than just one. In your initial post, explain the following:

The relationship between portfolio risk and the risk of the individual securities in the portfolio

The relative importance of each security’s risk as the number of securities held in a portfolio increases

The three primary factors contributing to portfolio risk and which one is the most important

Part 2

Summarize modern portfolio theory.

Explain when it might be useful to add a security with large risk to a portfolio.

Identify the strengths and weaknesses of the Markowitz model of modern portfolio theory.