Financial Management: Theory & Practice
Financial Management: Theory & Practice
16th Edition
ISBN: 9781337909730
Author: Brigham
Publisher: Cengage
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Chapter 6, Problem 9MC

1)

Summary Introduction

Case summary:

Person X is a graduate, who is working as a financial planner at company C. The president and congress involved in the dispute of acrimonious over the financing of debt and budget. The dispute which is not settled at the end of the year and effected the rate of interest.

The responsibility of person X is to compute the risk of bond portfolio of client. Person X should explain the probable scenarios for the dispute resolution and compute rate of return for 10 year zero coupon treasury bond for each cases.

To discuss: The manner in which impact of portfolio influence the investors think related to risk of single stocks.

2)

Summary Introduction

Case summary:

Person X is a graduate, who is working as a financial planner at company C. The president and congress involved in the dispute of acrimonious over the financing of debt and budget. The dispute which is not settled at the end of the year and effected the rate of interest.

The responsibility of person X is to compute the risk of bond portfolio of client. Person X should explain the probable scenarios for the dispute resolution and compute rate of return for 10 year zero coupon treasury bond for each cases.

To discuss: Whether person X expects to compensate all of his risk while earning risk premium on part of your risk and can removed by diversifying.

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Students have asked these similar questions
If you decided to hold a one- stock portfolio and consequently were exposed to more risk than diversified investors, could you expect to be compensated for all of your risk; that is, could you earn a risk premium on that part of your risk that you could have eliminated by diversifying?
1) Should portfolio effects influence how investors think about the risk of individual stocks?
Which of the following statements related to risk is (are) true: (i) Beta measures risk that cannot be diversified. (ii) As more shares are included in a portfolio the total risk of that portfolio goes down.  (iii) Investors are normally risk averse and, therefore, they demand a risk premium.

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Financial Management: Theory & Practice

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