The difference between systematic risk and unsystematic risk. Introduction: Systematic risk is essential for the complete market or segment. It is otherwise called market risk or undiversifiable risk that has an overall impact. This risk is unavoidable and not predictable. Here, hedging and appropriate strategy of asset allocation works out. While, mitigation with diversification is not possible. Systematic risk states how one investment supports to the total aggregate risk of business’s financial funding. Unsystematic risk is otherwise called the diversifiable, residual, non-systematic or specific risk. The proportion of a corporation’s total or aggregate risk which can be reduced through diversified asset portfolio.

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Answer 1

Question

Chapter 12, Problem 1CQ

Summary Introduction

To determine: The difference between systematic risk and unsystematic risk.

Introduction:

Systematic risk is essential for the complete market or segment. It is otherwise called market risk or undiversifiable risk that has an overall impact. This risk is unavoidable and not predictable. Here, hedging and appropriate strategy of asset allocation works out. While, mitigation with diversification is not possible.

Systematic risk states how one investment supports to the total aggregate risk of business’s financial funding.

Unsystematic risk is otherwise called the diversifiable, residual, non-systematic or specific risk. The proportion of a corporation’s total or aggregate risk which can be reduced through diversified asset portfolio.

Expert Solution & Answer

Explanation of Solution

The following are the differences between systematic risk and unsystematic risk:

Systematic risks are type of risks that cannot be differentiated through the construction of a portfolio.
Normally, systematic risk factors influence a substantial number of firms in the market, though those elements will not really influence all organizations similarly.
Unsystematic risk can be diversified or reduced through portfolio development.
Unsystematic risk issues are particular to the firm or industry.
While, some components impact the profitability of an industry/firm; it does not in another firm/industry. However, it can be applicable for different firms in same industry.

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(d) Estimate the value of a share of Cisco common stock using the discounted cash flow (DCF) model as of July 27, 2019 using the following assumptions Assumptions Discount rate (WACC) Common shares outstanding 7.60% 5,029.00 million Net nonoperating obligations (NNO) $(8,747) million NNO is negative, which means that Cisco has net nonoperating investments CSCO ($ millions) DCF Model Reported 2019 Forecast Horizon 2020 Est. 2021 Est. 2022 Est. 2023 Est. Terminal Period Increase in NOA FCFF (NOPAT - Increase in NOA) $ 1241 1303 1368 10673 11207 11767 1437 $ 12354 302 ✓ Present value of horizon FCFF 9918 9679 9445 ✔ 0 × Cum. present value of horizon FCFF $ 0 × Present value of terminal FCFF 0 ☑ Total firm value 0 ☑ NNO -8747 ✓ Firm equity value $ 0 ☑ Shares outstanding (millions) 5029 Stock price per share $ 40.05

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Answer 2

Question

Chapter 12, Problem 1CQ

Summary Introduction

To determine: The difference between systematic risk and unsystematic risk.

Introduction:

Systematic risk is essential for the complete market or segment. It is otherwise called market risk or undiversifiable risk that has an overall impact. This risk is unavoidable and not predictable. Here, hedging and appropriate strategy of asset allocation works out. While, mitigation with diversification is not possible.

Systematic risk states how one investment supports to the total aggregate risk of business’s financial funding.

Unsystematic risk is otherwise called the diversifiable, residual, non-systematic or specific risk. The proportion of a corporation’s total or aggregate risk which can be reduced through diversified asset portfolio.

Expert Solution & Answer

Explanation of Solution

The following are the differences between systematic risk and unsystematic risk:

Systematic risks are type of risks that cannot be differentiated through the construction of a portfolio.
Normally, systematic risk factors influence a substantial number of firms in the market, though those elements will not really influence all organizations similarly.
Unsystematic risk can be diversified or reduced through portfolio development.
Unsystematic risk issues are particular to the firm or industry.
While, some components impact the profitability of an industry/firm; it does not in another firm/industry. However, it can be applicable for different firms in same industry.

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Answer 3

Question

Chapter 12, Problem 1CQ

Summary Introduction

To determine: The difference between systematic risk and unsystematic risk.

Introduction:

Systematic risk is essential for the complete market or segment. It is otherwise called market risk or undiversifiable risk that has an overall impact. This risk is unavoidable and not predictable. Here, hedging and appropriate strategy of asset allocation works out. While, mitigation with diversification is not possible.

Systematic risk states how one investment supports to the total aggregate risk of business’s financial funding.

Unsystematic risk is otherwise called the diversifiable, residual, non-systematic or specific risk. The proportion of a corporation’s total or aggregate risk which can be reduced through diversified asset portfolio.

Expert Solution & Answer

Explanation of Solution

The following are the differences between systematic risk and unsystematic risk:

Systematic risks are type of risks that cannot be differentiated through the construction of a portfolio.
Normally, systematic risk factors influence a substantial number of firms in the market, though those elements will not really influence all organizations similarly.
Unsystematic risk can be diversified or reduced through portfolio development.
Unsystematic risk issues are particular to the firm or industry.
While, some components impact the profitability of an industry/firm; it does not in another firm/industry. However, it can be applicable for different firms in same industry.

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Answer 4

Question

Chapter 12, Problem 1CQ

Summary Introduction

To determine: The difference between systematic risk and unsystematic risk.

Introduction:

Systematic risk is essential for the complete market or segment. It is otherwise called market risk or undiversifiable risk that has an overall impact. This risk is unavoidable and not predictable. Here, hedging and appropriate strategy of asset allocation works out. While, mitigation with diversification is not possible.

Systematic risk states how one investment supports to the total aggregate risk of business’s financial funding.

Unsystematic risk is otherwise called the diversifiable, residual, non-systematic or specific risk. The proportion of a corporation’s total or aggregate risk which can be reduced through diversified asset portfolio.

Expert Solution & Answer

Explanation of Solution

The following are the differences between systematic risk and unsystematic risk:

Systematic risks are type of risks that cannot be differentiated through the construction of a portfolio.
Normally, systematic risk factors influence a substantial number of firms in the market, though those elements will not really influence all organizations similarly.
Unsystematic risk can be diversified or reduced through portfolio development.
Unsystematic risk issues are particular to the firm or industry.
While, some components impact the profitability of an industry/firm; it does not in another firm/industry. However, it can be applicable for different firms in same industry.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 12, Problem 1CQ

Summary Introduction

To determine: The difference between systematic risk and unsystematic risk.

Introduction:

Systematic risk is essential for the complete market or segment. It is otherwise called market risk or undiversifiable risk that has an overall impact. This risk is unavoidable and not predictable. Here, hedging and appropriate strategy of asset allocation works out. While, mitigation with diversification is not possible.

Systematic risk states how one investment supports to the total aggregate risk of business’s financial funding.

Unsystematic risk is otherwise called the diversifiable, residual, non-systematic or specific risk. The proportion of a corporation’s total or aggregate risk which can be reduced through diversified asset portfolio.

Expert Solution & Answer

Explanation of Solution

The following are the differences between systematic risk and unsystematic risk:

Systematic risks are type of risks that cannot be differentiated through the construction of a portfolio.
Normally, systematic risk factors influence a substantial number of firms in the market, though those elements will not really influence all organizations similarly.
Unsystematic risk can be diversified or reduced through portfolio development.
Unsystematic risk issues are particular to the firm or industry.
While, some components impact the profitability of an industry/firm; it does not in another firm/industry. However, it can be applicable for different firms in same industry.

Answer 6

Chapter 12, Problem 1CQ

Summary Introduction

To determine: The difference between systematic risk and unsystematic risk.

Introduction:

Systematic risk is essential for the complete market or segment. It is otherwise called market risk or undiversifiable risk that has an overall impact. This risk is unavoidable and not predictable. Here, hedging and appropriate strategy of asset allocation works out. While, mitigation with diversification is not possible.

Systematic risk states how one investment supports to the total aggregate risk of business’s financial funding.

Unsystematic risk is otherwise called the diversifiable, residual, non-systematic or specific risk. The proportion of a corporation’s total or aggregate risk which can be reduced through diversified asset portfolio.

Expert Solution & Answer

Explanation of Solution

The following are the differences between systematic risk and unsystematic risk:

Systematic risks are type of risks that cannot be differentiated through the construction of a portfolio.
Normally, systematic risk factors influence a substantial number of firms in the market, though those elements will not really influence all organizations similarly.
Unsystematic risk can be diversified or reduced through portfolio development.
Unsystematic risk issues are particular to the firm or industry.
While, some components impact the profitability of an industry/firm; it does not in another firm/industry. However, it can be applicable for different firms in same industry.

Answer 7

Chapter 12, Problem 1CQ

Summary Introduction

To determine: The difference between systematic risk and unsystematic risk.

Introduction:

Systematic risk is essential for the complete market or segment. It is otherwise called market risk or undiversifiable risk that has an overall impact. This risk is unavoidable and not predictable. Here, hedging and appropriate strategy of asset allocation works out. While, mitigation with diversification is not possible.

Systematic risk states how one investment supports to the total aggregate risk of business’s financial funding.

Unsystematic risk is otherwise called the diversifiable, residual, non-systematic or specific risk. The proportion of a corporation’s total or aggregate risk which can be reduced through diversified asset portfolio.

Answer 8

Expert Solution & Answer

Explanation of Solution

The following are the differences between systematic risk and unsystematic risk:

Systematic risks are type of risks that cannot be differentiated through the construction of a portfolio.
Normally, systematic risk factors influence a substantial number of firms in the market, though those elements will not really influence all organizations similarly.
Unsystematic risk can be diversified or reduced through portfolio development.
Unsystematic risk issues are particular to the firm or industry.
While, some components impact the profitability of an industry/firm; it does not in another firm/industry. However, it can be applicable for different firms in same industry.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

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Chapter 12 Solutions