Question
In: Accounting
The expected return on a risky asset depends only on that asset’s systematic risk.
The expected return on a risky asset depends only on that asset’s systematic risk.
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Expert Solution
The expected return on a risky asset depends only on that asset’s systematic risk..
The given Statement is wrong. The correct statement is that The expected return on a risky asset depends only on Market risk.
As per The Systematic Risk Priniciple ,only Systematic risk can affect the expected return of a well diversified portfolio.Unsystematic Risk are considered to be ir-relevant because the process of diversification eliminates the risk.
The various sources of Systematic Risk can be Macro economic factors such as Changes in Interest Rate, Fluctuation in Currencies ,Inflation, Recession etc
Macro factors which can influence the volatility of the entire market is Systematic Risk and it cannot be controlled by an Indiviual company.
Systematic risk can be of three types which are discussed below:
| 1)Market Risk | It is associated with the fluctuations in the market |
| 2)Interest Rate risk | Associated with the increase and decrease in the interest rate |
| 3)Inflationary risk | Excess of Demand over Supply |
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ekkarill92 answered 2 years agoRelated Solutions
1. The systematic risk principle states that the expected return on a risky asset depends only...
1.
The systematic risk principle states that the expected return on
a risky asset depends only on which one of the following?
Company-specific risk
Diversifiable risk.
Systematic risk
Unsystematic risk
2).
A company's stock has a beta of 1.04, the risk-free rate is
4.25%, and the total market return is 9.75%. What is its required
rate of return?
4.25%
9.97%
11.95%
12.83%
3).
An investor has a $100,000 stock portfolio. $32,000 is invested
in a stock with a beta of...
The amount of systematic risk present in a particular risky asset relative to that in an average risky asset is measured by the:
The amount of systematic risk present in a particular risky asset relative to that in an average risky asset is measured by the: Multiple Choice squared deviation beta coefficient standard deviation mean variance
If the expected return on a risky asset is 13%, standard deviation is 25%, and the risk free asset 5%.
If the expected return on a risky asset is 13%, standard
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The
systematic principle states that the reward for bearing risk
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Securities and portfolios lie above SML are underpricing. True
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When we apply WACC to evaluate projects with different levels
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We have only two risky assets in the market with the following risk and return: Expected...
We have only two risky assets in the market with the following
risk and return:
Expected Return
Standard Deviation
Stocks
20%
25%
Bonds
15%
15%
The correlation between the two risky assets is: 0.5 and the
risk free in the market is 8%.
Find the weight of Stocks and Bonds in the optimal portfolio.
Calculate the return and standard deviation of the optimal
portfolio.
Calculate the standard deviation of portfolio (P) with
an expected return of 15% on the CAL....
We have only two risky assets in the market with the following risk and return: Expected...
We have only two risky assets in the market with the following
risk and return:
Expected Return
Standard Deviation
Stocks
20%
25%
Bonds
15%
15%
The correlation between the two risky assets is: 0.5 and the
risk free in the market is 8%.
Find the weight of Stocks and Bonds in the optimal portfolio.
Calculate the return and standard deviation of the optimal
portfolio.
Calculate the standard deviation of portfolio (P) with
an expected return of 15% on the CAL....
The risk-free asset has a return of 1.62%. The risky asset has a return of 8.82%...
The risk-free asset has a return of 1.62%. The risky asset has a
return of 8.82% and has a variance of 8.82%. Karen has the
following utility function: LaTeX:
U=a\times\sqrt{r_{c\:}}-b\times\sigma_cU = a × r c − b × σ c, with
a=1.3 and b=8.78. LaTeX: r_cr c and LaTeX: \sigma_cσ c denote the
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Risky Asset 1 Risky Asset 2 Expected Return 0.11 .15 Standard Deviation 0.28 .88 The coefficient...
Risky Asset 1
Risky Asset 2
Expected Return
0.11
.15
Standard Deviation
0.28
.88
The coefficient of correlation ρ between these two assets is
equal to .009, and the risk free rate is 3.8%.
2A. If you wished to construct the optimal risky portfolio using
these two assets, what percentage this portfolio would consist of
Asset 1? (10 points)
2B. What is the expected return of the portfolio from 2A?
2C. What is the standard deviation of the portfolio from...
Risky Asset 1 Risky Asset 2 Expected Return 0.11 .15 Standard Deviation 0.28 .88 coefficient of...
Risky Asset 1
Risky Asset 2
Expected Return
0.11
.15
Standard Deviation
0.28
.88
coefficient of correlation ρ between these two assets is equal
to .009, and the risk-free rate is 3.8%.
1. If you wished to construct the optimal risky portfolio using
these two assets, what percentage this portfolio would consist of
Asset 1?
2. What is the expected return of the portfolio from question
1?
3. What is the standard deviation of the portfolio from question
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4....
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The slope of the capital allocation line formed with the risky
asset and the risk-free asset is equal to
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