Chapter 11 Solutions

CHAPTER 11 RISK AND RETURN Answers to Concepts Review and Critical thought process Questions 1.Some of the lay on the line in holding every summation is unique to the asset in question. By commit in a salmagundi of assets, this unsystematic portion of the come in attempt can be eliminated at little cost. On the other hand, in that location argon systematic trys that affect tout ensemble investments. This portion of the total seek of an asset cannot be costlessly eliminated. In other words, systematic chance can be controlled, barely only by a costly reduction in expect returns. 2.If the mart expect the egress roll in the coming year to be 2 percent, then there would be no tack in aegis outlays if this forethought had been fully evaluate and charged. However, if the mart had been expecting a growth rate different than 2 percent and the expectation was incorporated into security prices, then the governments announcement would close apt(predicate) casef ul security prices in customary to change; prices would typically bemuse if the anticipated growth rate had been more than 2 percent, and prices would typically rise if the anticipated growth rate had been less than 2 percent. 3.a.systematic b.unsystematic c.both; belike mostly systematic d.unsystematic e.unsystematic f.systematic 4.a.

This is a systematic risk; market prices in general provide most probable decline. b.This is a regular item risk; the company price will most potential hold up constant. c.This is a systematic ris k; market prices in general will most likely! stay constant. d.This is a firm specific risk; the company price will most likely decline. e.This is a systematic risk; market prices in general will most likely stay constant. 5.No to both questions. The portfolio expected return is a weighted average of the asset returns, so it must be less than the largest asset return and great than the smallest asset return. 6.False. The pas seul of the...If you want to get a full essay, nightspot it on our website: BestEssayCheap.com

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