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Unformatted text preview: standard deviation- square rot of the variance value at risk III. Risk aversion, the risk premium, and the risk-return trade-off a. Risk premium- the riskier and investment the higher the risk premium b. Trade-off between risk and expected return IV.Sources of risk: idiosyncratic and systematic risk a. Idiosyncratic risk affects specific firms, not everyone b. Systematic risk affects everyone V. Reducing Risk through Diversification a. Hedging risk b. Spreading risk...
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- Spring '08