MOD 3 Case FIN

MOD 3 Case FIN - Capital Asset Pricing Model Use! Business...

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Capital Asset Pricing Model 1 Use! Business Plans Byron E. Ferguson FIN 301 – Principles of Finance Module 3 Case Assignment Dr. John Halstead August 08, 2010
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Capital Asset Pricing Model 2 Examining Capital Asset Pricing Models The purpose of this study is to evaluate diversifiable and undiversifiable risk, second answer specific questions using Capital Asset Pricing Model (CAPM). Below each scenario is evaluated: Scenario one - a large fire severely damages three major cities. This problem is a clear example of undiversifiable risk. The severe damage to major cities will affect the U.S. economy as a whole, investors cannot protect against the broad fluctuations that occurs in response to each fire. Scenario two - examines a substantial unexpected rise in the price of oil. The increase in oil is an example of undiversifiable risk. The oil industry is tied to basically every aspect of society. Finding one company that doesn’t use some substance of oil is almost impossible. The change in the oil stock market will ultimately create a financial impact on every company.
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MOD 3 Case FIN - Capital Asset Pricing Model Use! Business...

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