Which of the following is a diversifiable risk? Multiple Choice The risk that the economy will go into a recession The price of oil rising The risk that a company's CEO is killed in a plane crash Inflation The corporate tax rate rising by 5%
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Which of the following is a diversifiable risk?
Multiple Choice
- The risk that the economy will go into a recession
- The price of oil rising
- The risk that a company's CEO is killed in a plane crash
- Inflation
- The corporate tax rate rising by 5%
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- Which of the following represent diversifiable risks? the president of a company suddenly resigns the economy goes into a recessionary period a company's product is recalled for defects the Federal Reserve unexpectedly changes interest rates Group of answer choices 2 and 4 only 1, 2, and 3 only 1, 2, and 4 only 1, 2, 3, and 4 1 and 3 onlyWhich of the following is an example of unsystematic risk? XYZ corp stock price fell when the news of a drop in GDP was released. When the new employment numbers showed the economy is creating more jobs, the stock market rose. ABC Manufacturing stock price falls upon the announcement that they have a parts shortage from their suppliers When news of strong consumer demand was released, proctor and gamble stock price rose The stock market rose at the announcement of higher GDP numbers1a. Consider the statement that an asset with higher risk must earn higher risk premium. Is it true or false? Please explain. b) A company with growth opportunities has dividend growth every year. Do you agree or not? Please explain. c) The Trump administration lowered corporate tax rate and this is a monetary policy. Is it true or false? If false, what type of policy is it.
- You are considering investing in Ford Motor Company. Which of the following are examples of diversifiable risk? I. Risk resulting from possibility of a stock market crash. II. Risk resulting from uncertainty regarding a possible strike against Ford. III. Risk resulting from an expensive recall of a Ford product. IV. Risk resulting from interest rates decreasing. A. I only B. I, II, III, IV C. II, III D. I and IVGive typing answer with explanation and conclusion Which of the following represent undiversifiable risks? I. The Federal Reserve raises interest rates. II. A product is recalled because of safety problems. III. The economy slips into a recession. IV. The CEO 's divorce settlement forces him to sell off half of his stock holdings.•Question 1 Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Allos Inc. Returns (RA) Orangus Inc.Returns (Rg) snäur Depression -20% Recession 20% %10% Normal -12% %6 Required: 1. For each company calculate: i. the expected returns ii. the Variance 2. Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, jii. the Standard deviation what will be your portfolio returns? 3. Calculate the Standard deviation of the portfolio.
- Consider the following scenario analysis: Scenario Recession Normal economy Boom. Probability 0.20 Stocks Bonds 0.60 0.20 a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. c. Which investment would you prefer? Expected Rate of Return 1.3% 0.8 % Complete this question by entering your answers in the tabs below. Required A Required B Required C Calculate the expected rate of return and standard deviation for each investment. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place. Rate of Return. Bonds 14% 8% 4% Standard Deviation Stocks -5% 15% 25% 15.3 Answer is complete but not entirely correct. % 8.1 % Dequired A RequiredA stock is expected to return 13 percent in an economic boom, 10 percent in a normal economy, and 3 percent in a recessionary economy. Which one of the following will lower the overall expected rate of return on this stock? A. An increase in the rate of return for a normal economy B. A decrease in the probability of a recession occurring C. A decrease in the probability of an economic boom D. No overall change in the rate of return in a recessionary economyNone
- QUESTION 1 The chairman of the world's largest asset manager said in his 2020 Annual Letter to Companies that "The financial world is on the edge of a revolution. He went on to explain that this would imply: O The underprivileged in society demanding that wealth was spread more evenly O That new applications of derivative securities would enable a much more effective income re-distribution O That there would be "a realocation of capital" as a result of a change in the risk/ reward profile of different types of asset due to market re-pricing That the "winner take all" syndrome would result in the finance industry having only 5 large asset managers and a few specialised niche providers within 5 years.[Question 20 Which one of the following is an example of unsystematic risk? Select one: A. Decrease in the national level of inflation B. An across the board increase in income taxes C. National decrease in consumer spending on entertainment D. Adoption of a national sales taxConsider the following scenario analysis: Scenario Recession Normal economy Boom Probability 0.20 0.60 0.20 Required A Required B Required C a. Is it reasonable to assume that Treasury bonds will provide higher returns in recessions than in booms? b. Calculate the expected rate of return and standard deviation for each investment. c. Which investment would you prefer? Stocks Bonds Rate of Return Stocks Complete this question by entering your answers in the tabs below. Expected Rate of Return 16.4 % 10.6 % -5% 20% 27% Calculate the expected rate of return and standard deviation for each investment. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place. Bonds 19% 10% 4% Standard Deviation % %