Explain how a shareholder can, without knowing the future, diversify away the unsystematic risk of your company's stock potentially suffering a return that unexpectedly turns out to equal the expected return in c.1 minus 98%. expected return from c.1 was 9.84%
Explain how a shareholder can, without knowing the future, diversify away the unsystematic risk of your company's stock potentially suffering a return that unexpectedly turns out to equal the expected return in c.1 minus 98%. expected return from c.1 was 9.84%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Explain how a shareholder can, without knowing the future, diversify away the unsystematic risk of your company's stock potentially suffering a return that unexpectedly turns out to equal the expected return in c.1 minus 98%.
expected return from c.1 was 9.84%
Expert Solution
Introduction
Diversification is a strategy that involves spreading investments across different assets or securities to reduce the overall risk of an investment portfolio. By investing in a range of different securities, a shareholder can reduce their exposure to the unsystematic risk of any one particular security.
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