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Question1 This is defined as the portion of total risk that is not diversifiable firm specific...
Beta is a measure of ______? - Firm specific risk - Unique risk - Diversifiable risk...
Beta is a measure of ______? - Firm specific risk - Unique risk - Diversifiable risk - Market risk
Beta measures a security's sensitivity to _________. Multiple Choice a) diversifiable risk b) firm-specific risk c)...
Beta measures a security's sensitivity to _________. Multiple Choice a) diversifiable risk b) firm-specific risk c) unique risk d) market risk
Fill Blanks 8 pts We learn three types of risk in the class: total risk, non-diversifiable...
Fill Blanks 8 pts We learn three types of risk in the class: total risk, non-diversifiable risk, and diversifiable risk. Which type of risk is related to each of the situations below? What type of risk does standard deviation measure? What type of risk does beta measure? Firm specific risk is also called? Required return is because of bearing which type of risk? -- True or False 12 pts Payback period ignores time values of cash flows. Always accept the...
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
Term Answer Description Risk A. The risk of an asset when it is the only asset...
Term Answer Description Risk A. The risk of an asset when it is the only asset in an investor's portfolio. Expected rate of return That portion of an investment's risk calculated as the difference between its total risk and its firm-specific risk. Beta coefficient This model determines the appropriate required return on a security as the sum of the market's risk-free rate and a risk premium based on the market's risk premium and the security's beta coefficient. Market risk The...
(a) In CAPM framework, there are risks that are diversifiable. What are the non-diversifiable risks? (2...
(a) In CAPM framework, there are risks that are diversifiable. What are the non-diversifiable risks? (2 marks) (b) See table 1 below. With respect to the CAPM, which of the following asset would have the greatest impact on the expected return if there is a rise in the expected market return? (2 marks) Table 1 Asset Standard Deviation Beta Asset 1 22% 0.5 Asset 2 15% 1.2 Asset 3 20% 0.9 (c) Suppose the following information about a stock is...
Stock A has an annual expected return of 8%, a beta of .9, and a firm-specific...
Stock A has an annual expected return of 8%, a beta of .9, and a firm-specific volatility of 50% Stock B has an annual expected return of 9%, a beta of 1.3, and a firm-specific volatility of 40% The market has a standard deviation of 20%, and the risk-free rate is is 2%. Suppose we construct a portfolio built out of 50% stock A, 30% stock B, and 20% government t-bills. What is the expected return of this portfolio? (in...
Term Description Risk A. The term applied to the risk of an asset that is measured...
Term Description Risk A. The term applied to the risk of an asset that is measured by the standard deviation of the asset's expected returns. That portion of an investment's risk calculated as the difference between its total risk and its firm-specific risk. Expected rate of return B. Beta coefficient L C . This model determines the appropriate required return on a security as the sum of the market's risk-free rate and a risk premium based on the market's risk...
The following are estimates for two stocks. Firm-Specific Standard Deviation Expected Return 12% 18 Stock Beta...
The following are estimates for two stocks. Firm-Specific Standard Deviation Expected Return 12% 18 Stock Beta 0.85 1.40 The market index has a standard deviation of 22% and the risk-free rate is 11% a. What are the standard deviations of stocks A and B? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) StockA Stock B b. Suppose that we were to construct a portfolio with proportions: Stock B Compute the expected return, standard deviation, beta, and...
The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 10...
The following are estimates for two stocks. Stock Expected Return Beta Firm-Specific Standard Deviation A 10 % 0.70 28 % B 18 1.25 42 The market index has a standard deviation of 22% and the risk-free rate is 7%. a. What are the standard deviations of stocks A and B? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Suppose that we were to construct a portfolio with proportions: Stock A 0.35 Stock B 0.35 T-bills...
Fill Blanks 8 pts We learn three types of risk in the class: total risk, non-diversifiable risk, and diversifiable risk. Which type of risk is related to each of the situations below? What type of risk does standard deviation measure? What type of risk does beta measure? Firm specific risk is also called? Required return is because of bearing which type of risk? -- True or False 12 pts Payback period ignores time values of cash flows. Always accept the...
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
Term Answer Description Risk A. The risk of an asset when it is the only asset in an investor's portfolio. Expected rate of return That portion of an investment's risk calculated as the difference between its total risk and its firm-specific risk. Beta coefficient This model determines the appropriate required return on a security as the sum of the market's risk-free rate and a risk premium based on the market's risk premium and the security's beta coefficient. Market risk The...
(a) In CAPM framework, there are risks that are diversifiable. What are the non-diversifiable risks? (2 marks) (b) See table 1 below. With respect to the CAPM, which of the following asset would have the greatest impact on the expected return if there is a rise in the expected market return? (2 marks) Table 1 Asset Standard Deviation Beta Asset 1 22% 0.5 Asset 2 15% 1.2 Asset 3 20% 0.9 (c) Suppose the following information about a stock is...
Term Description Risk A. The term applied to the risk of an asset that is measured by the standard deviation of the asset's expected returns. That portion of an investment's risk calculated as the difference between its total risk and its firm-specific risk. Expected rate of return B. Beta coefficient L C . This model determines the appropriate required return on a security as the sum of the market's risk-free rate and a risk premium based on the market's risk...
The following are estimates for two stocks. Firm-Specific Standard Deviation Expected Return 12% 18 Stock Beta 0.85 1.40 The market index has a standard deviation of 22% and the risk-free rate is 11% a. What are the standard deviations of stocks A and B? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) StockA Stock B b. Suppose that we were to construct a portfolio with proportions: Stock B Compute the expected return, standard deviation, beta, and...
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