FINANCE 301-MODULE-3-CASE

FINANCE 301-MODULE-3-CASE - FINANCE 301 MODULE 3 OVERDUE...

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FINANCE 301 MODULE 3 – OVERDUE CASE ASSIGNMENT DR. POLLARD 1. For each scenarios below, explain whether or not it represents a diversifiable or an un- diversifiable risk. Please consider the issues from the viewpoint of investor. Explain your reasoning. A. A large fire severely damages three major U.S. cities. This may be considered a market risk or undiversifiable risk. The reason I say this because this fire severely damaged three major cities. If an investor had stock in one of those cities that whole market could be affected by that fire. Even with a perfectly diversified portfolio there are some risks that cannot be avoided. These fires may result in a slight recession in the market and can cause interest rates to rise thereby diversification cannot be avoided. B. A substantial unexpected rise in the price of oil. Undiversifiable. This unexpected rise can affect the whole economy, both domestically and globally. Many investments can be affected due to economic and/or political factors. These type of factors on in the
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This note was uploaded on 10/26/2011 for the course FIN 301 taught by Professor Dr.sopko during the Fall '11 term at Trident Technical College.

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FINANCE 301-MODULE-3-CASE - FINANCE 301 MODULE 3 OVERDUE...

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