MOD3case - RODNEY BUCKMIRE MODULE 3 - CASE FIN 301 1. For...

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RODNEY BUCKMIRE MODULE 3 - CASE FIN 301 1. For each of the scenarios below, explain whether or not it represents a diversifiable or an undiversifiable risk. Please consider the issues from the viewpoint of investors. Explain your reasoning a. There's a substantial unexpected increase in inflation. This represents a undiversified risk since it will affect a large number of people no matter where their investments are and cannot be avoided by one company b. There's a major recession in the U.S. This represents a undiversified risk since it will affect a large number of companies as well c. A major lawsuit is filed against one large publicly traded corporation. This is a diversified risk since it only affects one company, and in fact may benefit other companies that offer similar products/services. 2. Use the CAPM to answer the following questions: a. Find the Expected Rate of Return on the Market Portfolio given that the Expected Rate of Return on Asset "i" is 12%, the Risk-Free Rate is 4%, and the Beta (b) for Asset "i" is 1.2.
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This note was uploaded on 02/01/2012 for the course FIN 301 taught by Professor Dr.sopko during the Spring '11 term at Trident Technical College.

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MOD3case - RODNEY BUCKMIRE MODULE 3 - CASE FIN 301 1. For...

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