The total risk associated with an asset has two parts: Blank______ risk and Blank______ risk. Multiple choice question. fixed; flexible systematic; market unsystematic; unique systematic; unsystematic
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The total risk associated with an asset has two parts: Blank______ risk and Blank______ risk.
fixed; flexible
systematic; market
unsystematic; unique
systematic; unsystematic
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- explain the unique characteristics of the asset class, their associated risks and potential returns. Foreach asset class, you should use one or two examples to support your explanation. Asset Class Characteristics Risk Potential Returns ExampleCash Products Fixed Income Equities CurrenciesDerivativesMarket 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 riskThe capital asset pricing model (CAPM) contends that there is systematic and unsystematic risk for an individual security. Which is the relevant risk variable and why is it relevant? Why is the other risk variable not relevant?
- 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 riskShow that options are riskier than the underlying assetsWhich of the following statements is true? Select one: Total risk = market risk + unique risk. Total risk = systematic risk + undiversifiable risk. Total risk = unique risk + diversifiable risk Market risk = undiversifiable risk + systematic risk. Total risk = diversifiable risk + firm-specific risk.
- Describe relationship between risk and profitability.Define the terms, or give short explanations. -risk-free rate -risk management -risk neutrality risk preference -risk premium -risk-return trade-offCAPM accounts for a. Unsystematic risk b. Systematic risk c. Both Systematic and Unsystematic risk d. Unique risk
- Define the terms, or give short explanations. -percentage return -price discovery -put -real asset -repurchase agreement (repo) -return -risk -risk aversionidentify the assumptions underlying the interest coverage ratio appropriate measure for analyzing long-term solvency risk? Alternatively, can you identify the assumptions underlying the interest coverage ratio appropriate measure for analyzing short-term solvency risk?True or false: The expected return on a security or other asset is equal to the sum of the possible returns multiplied by their probabilities. True false question. True False