Question

In: Finance

This is a two part question You are concerned about one of the assets in your...

This is a two part question You are concerned about one of the assets in your fully diversified portfolio. You just have an uneasy feeling about the CFO, Ian Malcolm, of that particular firm. You do believe, however that the firm makes a good product and that it is appropriately priced by the market. Should you be concerned about the effect on your portfolio if Malcolm embezzles a portion of the firm’s cash? Discuss in light of your readings on diversification of assets in a portfolio.

Further assume your friend Jane is trying to decide to purchase stock from that same company. Jane doesn’t hold a diversified portfolio like you do. Based on the relationship between risk and return, will you be willing to pay a higher price for the stock than Jane? Explain.

Solutions

Expert Solution

1. Yes, I will be concerned but my portfolio will be diversified and it will mean that if I have a large number of assets in my portfolio than my research will be limited to the particular form a specific factor and I will be able to eliminate with a large portion of the risk and if my overall portfolio is not a diversified, then I will have a larger risk

2. I will be willing to pay a lower price for this stock because I have a lower risk as my portfolio is diversified and it will mean that this diversification will lead to a lower price for this stock ,there is limited risk associated with this stock and I will not be willing to pay higher price as there is a lower amount of risk due to complete diversification of my portfolio.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

You are concerned about one of the assets in your fully diversified portfolio. You just have...
You are concerned about one of the assets in your fully diversified portfolio. You just have an uneasy feeling about the CFO, Ian Malcolm, of that particular firm. You do believe, however that the firm makes a good product and that it is appropriately priced by the market. Should you be concerned about the effect on your portfolio if Malcolm embezzles a portion of the firm’s cash? Discuss in light of your readings on diversification of assets in a portfolio....
What are several social problems that you are concerned about? Of these problems, which one is...
What are several social problems that you are concerned about? Of these problems, which one is the most important to you in terms of a solution being reached? 200-250 words
You are a U.S. exporter concerned about your transaction exposure on a recent sale to an...
You are a U.S. exporter concerned about your transaction exposure on a recent sale to an importer in Germany. The invoice, just sent, is for 500,000 euros payable in 60 days, which will be about mid-February. The current exchange rate is $1.00 per euro, and you fear that the dollar will appreciate against the euro due to the rebound in the domestic economy and the improvement in the economy with potentially increasing interest rates. The 60-day forward rate is $.99....
MYOCARDIAL INFRACTION: You are working for a cardiologist. Your physician is concerned about the increase in...
MYOCARDIAL INFRACTION: You are working for a cardiologist. Your physician is concerned about the increase in the number of the patients having heart attacks. He asks you to design a colorful, creative, and informative brochure on heart attacks using the brochure provided on the following provided. This brochure will be published and placed in the waiting room to provide patients with education about heart attacks.The heart disease Internet sites listed under "On the Web". Complete this activity. Questions: Answers: Questions:...
As the parent of a third grader, you are growing concerned about your daughter’s level of...
As the parent of a third grader, you are growing concerned about your daughter’s level of fitness and are considering putting her into an organized sports program. If your daughter is a typical American child, why would your concern over lack of fitness likely be warranted? Also, what are the pros and cons of placing a child into organized sports?
QUESTION THREE You are concerned about the possibility of experiencing on Coronavirus (COVID-19) during the next...
QUESTION THREE You are concerned about the possibility of experiencing on Coronavirus (COVID-19) during the next year. The probability of a COVID-19 outbreak is 0.5%. Your local insurer offers to pay you K300, 000 if a registered member of your family contracted COVID-19. The insurance policy costs K1, 500.00. If the inflation rate is forecast to be 10% during the next year, is the price of insurance policy fair.    A coin is biased so that it has a 60% chance...
Application 1 You work for an organization that is concerned about automotive technologies. Your supervisor has...
Application 1 You work for an organization that is concerned about automotive technologies. Your supervisor has asked that you examine and report significant conclusions for the following attached 1991 dataset. Your data analysis and conclusions will be used to compare similar data for more recent car models. Your data analysis must include: 1.) The mean, standard deviation, scatterplot, histogram, or bar chart as applicable for each of the data columns: VOL, HP, MPG, SP, WT. 2.) A paragraph that discusses...
This is a two-part discussion topic. In the first part, you will demonstrate your understanding of...
This is a two-part discussion topic. In the first part, you will demonstrate your understanding of one key aspect of perfect competition. In the second, you will apply your understanding of perfect competition to the world around you. 1. In a perfectly competitive industry, buyers and sellers are "price-takers". What exactly does it mean to say that sellers are price takers? [Hint: Why does a seller not sell at a price lower than the market-established equilibrium price? Why does a...
In Brazil, the government is also concerned about the situation explained in question 1. But it...
In Brazil, the government is also concerned about the situation explained in question 1. But it has come to light that many coffee brands are wrongly marketed as fair trade by unscrupulous coffee companies, disguising the low wages paid to bean pickers. Such firms also contribute to groundwater pollution and deforestation by squeezing coffee farmers who need to cut production cost to make a living. Use the theories of market failure and government intervention to explain the reasons for this...
In Brazil, the government is also concerned about the situation explained in question 1. But it...
In Brazil, the government is also concerned about the situation explained in question 1. But it has come to light that many coffee brands are wrongly marketed as fair trade by unscrupulous coffee companies, disguising the low wages paid to bean pickers. Such firms also contribute to groundwater pollution and deforestation by squeezing coffee farmers who need to cut production cost to make a living. Use the theories of market failure and government intervention to explain the reasons for this...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT