Systematic risk: Select one: 1. is related to the overall economy. 2. is measured by beta....

Systematic risk:

Select one:

1. is related to the overall economy.

2. is measured by beta.

3. is compensated for by the risk premium.

4. cannot be avoided if you wish to participate in the financial markets.

5. can be effectively eliminated through portfolio diversification.

Solutions

Expert Solution

Solution:

Systematic Risk:

Right option is 2. is measured by beta.

Systematic Risk is also known as Market Risk or Un-diversifiable Risk that is unceratainty inherent to the Entrie Market Segment. and it is also Referred as Volatility. The Systematic Risk consists Fluctuations in the Day to day Stock's Price. Systematic Risk is Measured by the Beta.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Which of the following statements concerning risk are correct? I. Systematic risk is measured by beta....

Which of the following statements concerning risk are correct? I. Systematic risk is measured by beta. II. The risk premium of a risky asset increases as diversifiable risk increases. III. Systematic risk is another name for nondiversifiable risk. IV. Diversifiable risks are systematic risks you cannot avoid. A.I and III only B.II and IV only C.I and II only D.III and IV only E.I, II, and III only

Assume that the only source of systematic risk in the economy is the market risk. Consider...

Assume that the only source of systematic risk in the economy is the market risk. Consider a portfolio (P) with the following characteristics (which were measured over a certain timeperiod T): mean or expected annual return (µp) = 100%, standard deviation of annual portfolio returns (σp) = 25% and a beta relative to the market (βp) = −1. During the same time-period T, the market index (M) had the following characteristics: mean or expected annual return (µm) = 33% and...

1) explain the importance of systematic risk and unsystematic risk in risk managament? 2) Discuss the...

1) explain the importance of systematic risk and unsystematic risk in risk managament? 2) Discuss the positive and negative aspects of systemstic risk and unsystematic risk?

A) Explain concepts of firm-specific risk, systematic risk, covariance, beta and how they are relevant for...

A) Explain concepts of firm-specific risk, systematic risk, covariance, beta and how they are relevant for portfolio construction. Discuss what CAPM model implies for investors. You are considering two stocks – Stock A with expected return of 8% and CAPM beta of 1.20 and Stock B with expected return of 11% and beta of 0.80. If the risk-free rate is 3 percent and the market risk premium is 6%, discuss whether these stocks are properly valued or not based on...

Risk can be subdivided into systematic and unsystematic risk. Describe each type of risk, the related...

Risk can be subdivided into systematic and unsystematic risk. Describe each type of risk, the related compensation for bearing that risk, and give some examples of each type.

1.Measuring Systematic Risk: Beta Coefficients The management of a publicly traded firm is interested in determining...

1.Measuring Systematic Risk: Beta Coefficients The management of a publicly traded firm is interested in determining the firm’s cost of equity capital using the security market line (SML) version of the capital asset pricing model (CAPM). Management has measured the weekly returns for the market (S&P 500), its own stock, and the risk-free rate. The returns were annualized. The annualized percentage returns for each of the last 20 weeks are provided. 1a. See data in Excel file provided with this...

Which has a higher systematic risk and why? (A) a stock with a slope(beta) of 0.8...

Which has a higher systematic risk and why? (A) a stock with a slope(beta) of 0.8 and R^2 of 0.7 (B) a stock with a slope(beta) of 0.4 and R^2 of 0.3

Why is beta a measure of systematic risk? What is its meaning? In trying to judge...

Why is beta a measure of systematic risk? What is its meaning? In trying to judge whether a company has too much debt, what financial ratios would you use and for what purpose? Auxier Manufacturing Company has a current ratio of 4 to 1 but is unable to pay its bills. Why? Explain, what is meant by the time value of money. Why is it important to calculate the present value? What kind of personal financial decisions have you made...

Briefly define beta, systematic risk and expected return and explain the relationship between them as they...

Briefly define beta, systematic risk and expected return and explain the relationship between them as they relate to investment management.

1. Explain the meaning of Systematic risk? 2. Explain the meaning of Jensen's alpha ( and...

1. Explain the meaning of Systematic risk? 2. Explain the meaning of Jensen's alpha ( and some graph will be included) Please, explain in detail as much as possible.

Subjects