This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Define the terms systematic risk and unsystematic risk. Be sure to explain the difference between ... (Read 59 times)

Sportsfan2111

  • Hero Member
  • *****
  • Posts: 585
on: Jul 10, 2018
Define the terms systematic risk and unsystematic risk. Be sure to explain the difference between the two. Which type of risk can be diversified away? How do we measure the remaining type of risk?
 
  Evaluate the statement: If we could just make our investment portfolio large enough, we could completely eliminate risk and earn a market portfolio rate of return with the risk of a risk-free investment.
  What will be an ideal response?

Question 2

When considering expected returns, the states of the world must sum to 1 (or 100).
 
  Indicate whether the statement is true or false.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

ong527

  • Sr. Member
  • ****
  • Posts: 285
Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: Systematic risk is risk that cannot be diversified away, is measured with beta, and is the risk that impacts all stocks in an economy. On the other hand, unsystematic or diversifiable risk CAN be diversified away. This is risk that is unique to the asset and can be eliminated when combined in a portfolio of risky assets. As for our statement, we CANNOT totally eliminate uncertainty of returns just by increasing the number of risky assets that make up the portfolio: although we can eliminate unnecessary or unsystematic risk, we cannot eliminate systematic risk through diversification. Therefore, we cannot realize a risk-free investment with greater than risk-free returns.

Answer to Question 2

Answer: TRUE


Sportsfan2111

  • Member
  • Posts: 585
Reply 2 on: Jul 10, 2018
YES! Correct, THANKS for helping me on my review

jackie

  • Member
  • Posts: 324
Reply 3 on: Yesterday
Wow, this really help

« previous next »
 

Did you know?

Egg cells are about the size of a grain of sand. They are formed inside of a female's ovaries before she is even born.

Did you know?

Eating food that has been cooked with poppy seeds may cause you to fail a drug screening test, because the seeds contain enough opiate alkaloids to register as a positive.

Did you know?

Coca-Cola originally used coca leaves and caffeine from the African kola nut. It was advertised as a therapeutic agent and "pickerupper." Eventually, its formulation was changed, and the coca leaves were removed because of the effects of regulation on cocaine-related products.

Did you know?

The shortest mature adult human of whom there is independent evidence was Gul Mohammed in India. In 1990, he was measured in New Delhi and stood 22.5 inches tall.

Did you know?

According to the National Institute of Environmental Health Sciences, lung disease is the third leading killer in the United States, responsible for one in seven deaths. It is the leading cause of death among infants under the age of one year.

The difference between a human and an ape. The difference between a human and an ape.
Medical Terms and Corresponding Synonyms Medical Terms and Corresponding Synonyms
Directional Terms Directional Terms
Difference spectra of mitochondria Difference spectra of mitochondria
Improving your flexibility can help you reduce muscle soreness and lower your risk of injury Improving your flexibility can help you reduce muscle soreness and lower your risk of injury
Relative lifetime risk of schizophrenia Relative lifetime risk of schizophrenia
Video: Embryonic development - Week 4

For a complete list of videos, visit our video library