None Diversification can reduceA. systematic risk onlyB. unsystematic risk onlyC. both systematic andunsystematic D. Market risk

Reason:In context of finance, stocks or any other risky financial asset all have total risk which is…

Answered: Diversification can reduce A.…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter11: Risk-adjusted Expected Rates Of Return And The Dividends Valuation Approach

Section: Chapter Questions

Problem 5QE

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The risk associated with the overall market is referred to as _____ risk. a. unsystematic b. diversified c. portfolio d. systematic
Market risk ________. a. is equal to the rate of return generated by a risk-free asset b. cannot be eliminated, as it is non-diversifiable c. is synonymous with diversifiable risk d. is synonymous with financial risk
List which of the following statement(s) concerning risk are correct? 1. Nondiversifiable risk is measured by beta. II. The risk premium increases as diversifiable risk increases. III. Systematic risk is another name for nondiversifiable risk. IV. Diversifiable risks are market risks you cannot avoid.
The systematic risk principle states that the expected return on a risky asset depends only on which one of the following? Unsystematic risk Market risk Diversifiable risk
The desired rate of return on an investment should reflect the degree of risk involved. A. True B. False
CAPM accounts for a. Unsystematic risk b. Systematic risk c. Both Systematic and Unsystematic risk d. Unique risk
What type of risk is the risk that belongs to the market as a whole? Systematic risk Unsystematic risk (or nonsystematic risk) Total risk
Which of the following statements are true about systematic risk? Select one or more: a. Beta is a measure of systematic risk in ALL asset pricing models b. Systematic risk can be fully eliminated by diversification С. Systematic risk can be traded among financial entities but cannot be destroyed or eliminated d. All stocks must have the same exposure/factor loading on systematic risk e. Systematic risk is priced f. The premia on systematic risk must always be higher than the risk-free rate Which statements are true of optimization? Select one or more: a. It is a general mathematical tool and can be used not only in portfolio optimization but many business problems b. When applied in real world setting we often use computers to estimate the optimum numerically rather than doing calculus by hand с. One of the earliest applications of optimization to business problems is Augustin Cournot's 1838 duopoly pricing model d. Optimization can only ever be as effective as the description of the…
According to the CAPM, which of the following risks is irrelevant? Select one: a. Unsystematic risk b. Systematic risk c. All risks are always relevant d. Market risk
What does Jensen's alpha measure? a. An investor's reward in proportion to their assumption of systematic risk b. The abnormal return of an asset, defined as the degree to which its actual return exceeds that predicted by the capital asset pricing model c. The degree to which diversifiable risk is eliminated d. How much reward an investor is getting for each unit of risk assumed
MC question attached
Market risk is referred to as: systematic risk. total risk. diversifiable risk. asset specific risk. Standard deviation and beta both measure risk, but they are different in that beta measures both systematic and unsystematic risk. beta measures only systematic risk while standard deviation is a measure of total risk. beta measures only unsystematic risk while standard deviation is a measure of total risk. beta measures both systematic and unsystematic risk while standard deviation measures only systematic risk. beta measures total risk while standard deviation measures only nonsystematic risk. Buying common stock is riskier than buying a U.S Treasury bill. state reason in 'other' true False Other: Which one of the following statements is an example of unsystematic risk? The number of vehicles sold by a major manufacturer was less than anticipated. GDP was 0.5 percent lower than expected. The inflation rate increased by 5 percent. The value of the dollar declined against…

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Diversification can reduce A. systematic risk only B. unsystematic risk only C. both systematic and unsystematic D. Market risk