Answers to these and many other questions can be found by going online and searching for it. 31) Unsystematic risk can be eliminated through diversification. Since systematic risk cannot be diversified away, investors are compensated for taking this risk. The market rewards investors for the systematic risk that cannot be eliminated through proper asset allocation in a diversified portfolio. The market risk premium would increase. If the expected risk-free return is 2% and the market offers a premium of 8% over the risk-free rate, what is the expected return on Siebling’s common unique boutique ? When the risk premium is added to the risk free rate, this results in the required return for the stock. 37) Briefly discuss why there is no reason to believe that the market will reward investors with additional returns for assuming unsystematic risk. There is certainly nothing embarrassing about that. The non-manufacturing purchasing managers’ index (PMI) rose to 57.1 in June from 45.4 in May, marking a record increase based on data going back to 1997. The level was the highest in four months.
Watch out from a break above $3.75 which could spark a rally back to the $3.96-$4.00 resistance zone. I have also closed out positions in some overvalued counters like Green Build, E2-Capital and Singapore Windsor. That outlook has pushed government bond yields lower as prices have risen, and driven investors into riskier assets like stocks. 28) If investors became more risk averse The SML would shift downward and the slope of the SML would fall. 7) The security market line (SML) relates risk to return, for a given set of market conditions. Answer: Beta is an important measure that indicates the systematic risk of a given investment. Cannot be determined with information given. Science can now verify that this information is correct. 21) U. S. Treasury bills can be used to approximate the risk-free rate. 8) The Elvis Alive Corporation, makers of Elvis memorabilia, has a beta of 2.35. The return on the market portfolio is 12%, and the risk-free rate is 2.5%. According to CAPM, what is the risk premium on a stock with a beta of 1.0? Unsystematic, or company, risk can be reduced through diversification. Neither systematic nor unsystematic risk can be reduced through diversification. Systematic, or market, risk can be reduced through diversification.