Risk: Risk involves the chance that the actual return of an investment shall vary from the anticipated return. It includes the chances of losing either some or the entire original amount invested. The different forms of risk can be determined by determining the standard deviation of the historical returns or the average returns of a particular investment. Systematic risk refers to the risk that cannot be removed considering the fact that such type of risk is non-diversifiable in nature. On the other hand, unsystematic risk refers to the risk that cannot be removed through diversification. They are neither subject to sever risk related to the investment made by the investor. Such type of risk is diversifiable in nature. To identify: Whether the systematic risk and unsystematic risk is likely to be different.

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Chapter 11, Problem 10CT

Summary Introduction

Risk:

Risk involves the chance that the actual return of an investment shall vary from the anticipated return. It includes the chances of losing either some or the entire original amount invested. The different forms of risk can be determined by determining the standard deviation of the historical returns or the average returns of a particular investment.

Systematic risk refers to the risk that cannot be removed considering the fact that such type of risk is non-diversifiable in nature. On the other hand, unsystematic risk refers to the risk that cannot be removed through diversification. They are neither subject to sever risk related to the investment made by the investor. Such type of risk is diversifiable in nature.

To identify:

Whether the systematic risk and unsystematic risk is likely to be different.

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