FIN 100 PAPER - 1 Understanding the concepts realized...

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1 Understanding the concepts realized return of the stock, systematic and unsystematic risk, risk of the portfolio, beta, WACC. Carl J. Flowers Strayer University, Principles of Finance – FIN 100 Professor Mia Russell Principles of Finance – FIN 100 May 19, 2011
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2 Identify the components of a stock’s realized return From my review, there are several reasons why investors may want to periodically confirm the actual return generated on his or her investments. Number one has to do with the stability of the portfolio itself. If the rate of return for the portfolio overall is low or should decrease, this is a sign that some diversification in the types of investments would be a good idea. In the event that the portfolio is already diverse, a loss in return could indicate that one or more of the investment types compose a higher percentage of the overall worth of the collected assets than they should. With both scenarios, noting that the realized return is not what it should be can prompt the investor to make changes before further losses are incurred. Contrast systematic and unsystematic risk In finance, systematic risk, sometimes called market risk, aggregate risk, or undiversifiable risk, is the risk associated with aggregate market returns. By contrast, unsystematic risk, sometimes called specific risk, idiosyncratic risk, residual risk, or diversifiable risk, is the
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This note was uploaded on 07/10/2011 for the course FIN 100 taught by Professor Jones during the Spring '07 term at Strayer.

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FIN 100 PAPER - 1 Understanding the concepts realized...

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