Diversification cannot eliminate risk entirely because stocks (assets, projects) have: (a) nonsystematic risk (b) systematic risk...
Diversification cannot eliminate risk entirely because stocks (assets, projects) have:
(a) nonsystematic risk
(b) systematic risk
(c) unique risk
(d) diversifiable risk
Homework Answers
Answer - Systematic Risk
Non-systematic risk, unique risk or diversifiable risk are all terms to same concept and denote the risk which can be removed by diversification. That is a characteristic of an individual stock. Systematic risk is the market risk, which can't be removed by diversification.
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Diversification cannot eliminate risk entirely because stocks
(assets, projects) have:
(a) nonsystematic risk
(b) systematic risk...
Marker risk is also called: a. Systematic risk and diversifiable risk b. Systematic risk and unique...
Marker risk is also called: a. Systematic risk and diversifiable risk b. Systematic risk and unique risk c. Non-diversifiable risk and systematic risk d. Unique risk and non-diversifiable risk
Diversification can eliminate: a. all risk in a portfolio. b. risk only if the investor is...
Diversification can eliminate: a. all risk in a portfolio. b. risk only if the investor is risk averse. c. the systematic risk in a portfolio. d. the idiosyncratic risk in a portfolio.
is risk that cannot be diversified away. O A. Diversifiable risk O B. Unsystematic risk O C. Systematic risk O D. Firm-specific risk is risk that cannot be diversified away. O A. Diversifiab...
is risk that cannot be diversified away. O A. Diversifiable risk O B. Unsystematic risk O C. Systematic risk O D. Firm-specific risk
is risk that cannot be diversified away. O A. Diversifiable risk O B. Unsystematic risk O C. Systematic risk O D. Firm-specific risk
8. Systematic risk is rewarded with a premium in the marketplace because: A. risk is particular...
8. Systematic risk is rewarded with a premium in the marketplace because: A. risk is particular to the stock or industry. B. it represents a random occurrence which could not have been foreseen. C. it is associated with market movements which cannot be eliminated through diversification. D. None of the above
14. If an investor buys enough stocks, he or she can, through diversification, eliminate all of...
14. If an investor buys enough stocks, he or she can, through diversification, eliminate all of the unique risk inherent in owning stocks, but as a general rule it will not be possible to eliminate all systemic risk. a. True b. False 15. A stock is expected to pay a dividend of $0.75 at the end of year one. The required rate of return is rs = 10.5%, and the company has a return on equity of 12.8%, while paying...
Which statement is TRUE? a) All of these statements are false b) The measure of risk...
Which statement is TRUE? a) All of these statements are false b) The measure of risk for a security held in a diversified portfolio is standard deviation c) As more stocks are added to a portfolio, total risk is expected to fall but at an increasing rate. So if one were to invest in enough stocks, total risk could be eliminated. d) Diversification reduces the portfolio’s expected return because it reduces the portfolio’s total risk e) Proper diversification can reduce...
Diversification will not help to reduce Select one: a. Overall risk b. Systematic risk c. Idiosyncratic...
Diversification will not help to reduce Select one: a. Overall risk b. Systematic risk c. Idiosyncratic risk
Portfolio diversification. a) Reduces the effect of high returns of high-earnings stocks. b) Reduces the effect...
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Diversifiable risk is also called: a) Diversifiable Return b) Systematic risk c) Unsystematic risk d) All...
Diversifiable risk is also called: a) Diversifiable Return b) Systematic risk c) Unsystematic risk d) All of the above
john c hull risk management 1.4 What is the difference between systematic and nonsystematic risk? Which...
john c hull risk management
1.4 What is the difference between systematic and nonsystematic risk? Which is more important to an equity investor? Which can lead to the bankruptcy of a corporation? 1.5 Outline the arguments leading to the conclusion that all investors should choose the same portfolio of risky investments. What are the key assumptions? 1.6 The expected return on the market portfolio is 12% and the risk-free rate is 6%. What is the expected return on an investment...
is risk that cannot be diversified away. O A. Diversifiable risk O B. Unsystematic risk O C. Systematic risk O D. Firm-specific risk
is risk that cannot be diversified away. O A. Diversifiable risk O B. Unsystematic risk O C. Systematic risk O D. Firm-specific risk
14. If an investor buys enough stocks, he or she can, through diversification, eliminate all of the unique risk inherent in owning stocks, but as a general rule it will not be possible to eliminate all systemic risk. a. True b. False 15. A stock is expected to pay a dividend of $0.75 at the end of year one. The required rate of return is rs = 10.5%, and the company has a return on equity of 12.8%, while paying...
john c hull risk management
1.4 What is the difference between systematic and nonsystematic risk? Which is more important to an equity investor? Which can lead to the bankruptcy of a corporation? 1.5 Outline the arguments leading to the conclusion that all investors should choose the same portfolio of risky investments. What are the key assumptions? 1.6 The expected return on the market portfolio is 12% and the risk-free rate is 6%. What is the expected return on an investment...
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