Homework Answers
Answer:-
Q 12)
Systematic portion of UNE Return = (Rm - ERm) x Beta
A
= ( 2% - 4%) x 0.89
= - 2 % x 0.89
= - 1.78 %
Unsystematic portion of UNE Return = ( Ra - ERa ) - (Rm
- ERm ) x Beta A
= (5% - 7% ) - ( 2% - 4% )x 0.89
= - 2% - (-1.78 % )
= - 2 % + 1.78 %
= - 0.22 %
The Systematic risk which cannot be diversified is equal to - 1.78% where as the Unsystematic risk which can be diversified is -0.22 %. Here the Unsystematic risk is higher than the Systematic risk.
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