Find the best solutions to your questions at Westonci.ca, the premier Q&A platform with a community of knowledgeable experts. Get accurate and detailed answers to your questions from a dedicated community of experts on our Q&A platform. Connect with a community of professionals ready to provide precise solutions to your questions quickly and accurately.
Sagot :
Solution :
1. The relevant risk is considered as the "unknown unknowns" which may occur due to the risk in everyday life. In all risky investments, it is unavoidable. The contribution of the stock to the market risk in a well diversified portfolio is called as the relevant risk. Diversification is the main strategy for minimizing the relevant risk.
2.
Statement : A stock that is more volatile than the market will have a beta of less than 1.0.
---- False, as it will be more volatile with that of the market.
Statement : Over time, a stock with a beta of 1.0 produces a return that goes up and down with a 1:1 relationship with the return on the market
---- True as beta of the market is 1 and therefore, the stock beta is also 1.
Statement : Beta measures the volatility in stock movements relative to the market.
--- True. The beta measures all the volatility in the stock moments relative to the market.
3. We know that :
[tex]$\text{Beta= Correlation coefficient} \times \frac{\text{SD of stock}}{\text{SD of market}} $[/tex]
[tex]$=0.65 \times \frac{35}{32}$[/tex]
= 0.71
4. The percentage of the variance in the stock of the company that is explained by the market is lower than that of the typical stock.
We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Westonci.ca is your go-to source for reliable answers. Return soon for more expert insights.
