FIN 300 : chap 13
Document Summary
Answers to concepts review and critical thinking questions. Some of the risk in holding any asset is unique to the asset in question. By investing in a variety of assets, this unique portion of the total risk can be eliminated at little cost. On the other hand, there are some risks that affect all investments. This portion of the total risk of an asset cannot be cost-lessly eliminated. In other words, systematic risk can be controlled, but only by a costly reduction in expected returns. If the market expected the growth rate in the coming year to be 2 percent, then there would be no change in security prices if this expectation had been fully anticipated and priced. 2 percent, and prices would rise if the anticipated growth rate had been less than 2 percent. a. b. c. d. e. f. systematic unsystematic both; probably mostly systematic unsystematic unsystematic systematic.