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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Pam and Jim are saving money for their two children who they plan to send to university.The eldest child will enter university in 5 years while the younger will enter in 7 years. Each child is expected spend four years at university. University fees are currently R20 000 per year and are expected to grow at 5% per year. These fees are paid at the beginning of each year.Pam and Jim currently have R40 000 in their savings and their plan is to save a fixed amount each year for the next 5 years. The first deposit taking place at the end of the current year and the last deposit at the date the first university fees are paid.Pam and Jim expect to earn 10% per year on their investments.What amount should they invest each year to meet the cost of their children’s university fees?

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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