Unsystematic risk finance quizlet. Risk resulting from possibility of a stock market crash.

Unsystematic risk finance quizlet Investing Study with Quizlet and memorize flashcards containing terms like Diversifiable risk (also known as unsystematic risk), Unsystematic risk, non-diversifiable risk (also known as systematic risk) and more. Quiz yourself with questions and answers for Types of Risk - Finance Exam 1, so you can be ready for test day. A. a term used interchangeably with asset-specific risk. DEVIATION = TOTAL RISK = COMMON (SYSTEMATIC) RISK - In this case, due to diversification: INDEPENDENT (UNSYSTEMATIC) RISK converged to 0 Risk and Return - Because investors can eliminate UNSYSTEMATIC risk by diversifying, they do not require (nor deserve) a compensation (or risk premium) for bearing such risk. 11. Study with Quizlet and memorize flashcards containing terms like Systematic risk, Unsystematic risk can be defined as all of the following except: market risk unrewarded risk asset-specific risk unique risk diversifiable risk, Katie owns 100 shares of ABC stock. Explore quizzes and practice tests created by teachers and students or create one from your course material. II. diversification reduces unsystematic risk by investing in a variety of assets Unsystematic risk can be defined by all of the following except: unrewarded risk, diversifiable risk, unique risk, asset- specific risk. This occurrence is best described as an example of ________ risk. Investing $100,000 in a combination of US and Asian stocks B. Unsystematic risk, also known as "specific risk," "diversifiable risk" or "residual risk," is the type of Study with Quizlet and memorize flashcards containing terms like Which of the following statements regarding unsystematic risk is accurate?, An unexpected post on social media caused the prices of 22 different companies' stocks to immediately increase by 10 to 15 percent. If 40 Percent of the funds are invested in stock A and the rest in stock B, what is the expected This effect is due to the fact that unsystematic events do not strike all companies at the same time, so when some of your stocks have negative unsystematic events, others will have positive ones. Risk resulting from possibility of a stock market crash. ) It is the portion of risk that assumes the risk premium. Jul 2, 2024 · Study with Quizlet and memorize flashcards containing terms like When an investor is diversified only ________________ risk matters. , Investors should earn a risk premium for bearing unsystematic risk. Systematic risk is another name for nondiversifiable risk. - It does not require additional compensation in terms of expected return. if you invest in a porfolio, can diversify risk through diversification. ) It is also known as diversifiable risk. d. Diversifiable risks are Study with Quizlet and memorize flashcards containing terms like In broad terms, why is some risk diversifiable? Why are some risks nondiversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic risk?, Suppose the government announces that, based on a just-completed survey, the growth rate in the economy is likely to Study with Quizlet and memorize flashcards containing terms like On a particular risky investment, investors require an excess return of 7 percent in addition to the risk-free rate of 4 percent. Study with Quizlet and memorize flashcards containing terms like Independent risks can be diversified by holding a large number of uncorrelated assets with independent risks. - An investor can avoid this type of risk through calculated investment choices. b. Thus, the standard deviation of returns does not explain the average return of an individual security. Unsystematic risk, also known as specific risk, unique risk, idiosyncratic risk, or diversifiable risk, is the risk associated with individual assets. ) It can be mitigated with active fund management, but not passive fund management. , A stock whose return does not depend on overall economic conditions has a low systematic risk. Study with Quizlet and memorize flashcards containing terms like Which of the following statements regarding unsystematic risk is accurate?, Which of the following statements are accurate? I. Unsystematic risk can be defined by all of the following except: market risk. Thus, the shocks will be offset and the unsystematic risk of the whole portfolio will be reduced. Which of the following terms is used to refer to the return that Katie and the other shareholders require on their investment in ABC Study with Quizlet and memorize flashcards containing terms like The Blank of a portfolio of two or more securities is equal to the weighted average of the blank of each of the individual, Stock A has an expected return of 10 percent per year and stock B has an expected return of 20% percent. Nondiversifiable risk is measured by beta. it can be eliminated through diversification. What is this excess return called?, An efficient capital market is best defined as a market in which security prices reflect which one of the following?, The lower the standard deviation of returns on -the risk of an individual security is composed of both systematic risk + unsystematic risk -because investors can easily diversify, or reduce exposure to unsystematic risk, there is no reward for its bearing. Study with Quizlet and memorize flashcards containing terms like Systematic risk and examples, Unsystematic risk and examples, purchasing power risk and more. c. - It is less tightly linked to the market as a whole than unsystematic risk. e. ) It is unaffected by hedging. , by investing in a variety of assets that are not closely related. a risk that is unique to an asset meaning that it can be reduced by holding a portfolio of assets that are uncorrelated diversification the process of spreading investments across more than a single asset. unnatural B. Higher quarterly loss than expected for Procter and Gamble Lower consumer spending than expected Latest unemployment figures increased, as expected Study with Quizlet and memorize flashcards containing terms like In broad terms, why are some risks diversifiable? Why are some risks not diversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic risk?, Suppose the government announces that, based on a just-completed survey, the growth rate in the economy is likely Study with Quizlet and memorize flashcards containing terms like In broad terms, why is some risk diversifiable? Why are some risks nondiversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic risk?, Suppose the government announces that, based on a just-completed survey, the growth rate in the economy is likely to Study with Quizlet and memorize flashcards containing terms like We diversify our investments across a number of different assets in the hope that the common variations (systematic risk) will cancel each other out. unsystematic risk is specific risk/diversificable risk that comes with the company you are investing in. Risk resulting . Risk resulting from an expensive recall of a Ford product. III. 17 and an expected, The beta of a risky portfolio cannot be less than _____ nor greater than ____. when you invest in one stock you are accepting total risk. The risk premium increases as diversifiable risk increases. and more. Which of the following are examples of unsystematic risk? I. IV. Which of the following is true of unsystematic risk? a. It can be reduced or eliminated through diversification, i. Risk resulting from uncertainty regarding a possible strike against Ford. Which term best refers to the practice of investing in a variety of diverse assets as a means of reducing risk? Explain how diversification changes the total risk of a portfolio? Study with Quizlet and memorize flashcards containing terms like Unsystematic Risk, Diversification, Unsystematic Risk and more. , Beta refers to the measure of unsystematic risk and more. See full list on investopedia. The risk that an investor ill not be able to quickly sell an investment, or to sell it at an acceptable price due to a lack of buying interest. systematic, Which of the following are examples of a portfolio? A. , The income component of return for a common stock comes from the cash dividend a firm pays. ) I. Systematic risk changes over time, while unsystematic risk remains constant. Study with Quizlet and memorize flashcards containing terms like Which of the following is an example of systematic risk?, Which of the following is an example of unsystematic risk?, What do you call the portion of your total return on a stock investment that is caused by an increase in the value of the stock. Study with Quizlet and memorize flashcards containing terms like Unsystematic Risk, Business Risk, Obsolescence Risk and more. Unsystematic risk can be defined by all of the following Study with Quizlet and memorize flashcards containing terms like You are considering investing in Ford Motor Company. Which of the following would be considered an example of diversifiable (unsystematic) risk? (Select the best choice below. diversifiable D. Investing $100,000 in the stocks of 50 publicly traded corporations C. Study with Quizlet and memorize flashcards containing terms like In broad terms, why is some risk diversifiable? Why are some risks nondiversifiable? Does it follow that an investor can control the level of unsystematic risk in a portfolio, but not the level of systematic risk?, Suppose the government announces that, based on a just-completed survey, the growth rate in the economy is likely to Study with Quizlet and memorize flashcards containing terms like Portfolio diversification eliminates:, Stock J has a beta of 1. unsystematic C. , Most financial securities have some level of Unsystematic; Rick associated with a particular type of business, such as: banks-risk of robbery or employee theft, Petroleum refiners-fire or explosion and tanker leakage, Chemical companies-spills or other pollution issues - It cannot be diversified away by holding a pool of individual assets. Systematic risk is defined as: any risk that affects a large number of assets. com Systematic risk refers to the risk associated with specific industries, while unsystematic risk refers to the risk associated with specific geographical areas. Study with Quizlet and memorize flashcards containing terms like True or False: The slope of the Security Market Line is the market risk premium (Rm - Rf), Total risk is:, True or False: The independent (X-axis) variable typically used to estimate Beta is the stock's return. znsvskty jdxm xhfg fca ywkz eoys zuqz hybb zobh jgtro