Chapter 11 Solutions

CHAPTER 11 RISK AND RETURN Answers to Concepts Review and Critical thought Questions 1.Some of the lay on the line in holding either summation is unique to the asset in question. By commit in a salmagundi of assets, this unsystematic portion of the sum attempt can be eliminated at little cost. On the other hand, in that location argon systematic trys that affect only investments. This portion of the total seek of an asset cannot be costlessly eliminated. In other words, systematic find can be controlled, solely only by a costly reduction in expect returns. 2.If the mart anticipate the egress drift in the coming year to be 2 percent, then there would be no tack in gage outlays if this foresight had been fully evaluate and setd. 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) take security prices in ev eryday to change; prices would typically drop off 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 go out most possible decline. b.This is a regular unique(predicate) risk; the company price will most likely hold up constant. c.This is a systematic risk; market pric es 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, lay out it on our website: BestEssayCheap.com

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