TOPIC 8 - RISK AND RETURNQ11.1Diversifiable and Nondiversifiable Risks. In broad terms, why is some riskdiversifiable? Why are some risks non-diversifiable? Does it follow that aninvestor can control the level of unsystematic risk in a portfolio, but not the levelof systematic risk? Q11.3Systematic versus Unsystematic Risk. Classify the following events as mostlysystematic or mostly unsystematic. Is the distinction clear in every case? a) Short-term interest rates increase unexpectedly. b) The interest rate a company pays on its short-term debt borrowing is increased by its bank. c) Oil prices unexpectedly decline. d) An oil tanker ruptures, creating a large oil spill. e) A manufacturer loses a multimillion-dollar product liability suit. f) A Supreme Court decision substantially broadens producer liability for injuries suffered by product users.
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- Spring '14