FIN302- Ch 7-8 solutions

FIN302- Ch 7-8 solutions - Chapter 07 - Introduction to...

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Chapter 07 - Introduction to Risk and Return CHAPTER 7 Introduction to Risk and Return Assignment: Chapter 7: 4, 5, 12, 13, 19 Assignment Chapter 8: 7, 8, 12, Challenge question #22 (requires calculus) Yahoo finance data solution will be posted separately. 4. a. False b. True c. False d. False e. False f. True g. True h. False 5. d 12. The risk to Hippique shareholders depends on the market risk, or beta, of the investment in the black stallion. The information given in the problem suggests that the horse has very high unique risk, but we have no information regarding the horse’s market risk. So, the best estimate is that this horse has a market risk about equal to that of other racehorses, and thus this investment is not a particularly risky one for Hippique shareholders. 13. In the context of a well-diversified portfolio, the only risk characteristic of a single security that matters is the security’s contribution to the overall portfolio risk. This contribution is measured by beta. Lonesome Gulch is the safer investment for a
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This note was uploaded on 11/15/2011 for the course FIN 302 taught by Professor Kellybrunarski during the Spring '11 term at Miami University.

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FIN302- Ch 7-8 solutions - Chapter 07 - Introduction to...

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