RWJ11

MKTG (with Marketing CourseMate with eBook Printed Access Card)

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CHAPTER 11 RISK AND RETURN Answers to Concepts Review and Critical Thinking Questions1. Some of the risk in holding any asset is unique to the asset in question. By investing in a variety of assets, this unsystematic portion of the total risk can be eliminated at little cost. On the other hand,there are systematic risks that affect all investments. This portion of the total risk of an asset cannot becostlessly eliminated. In other words, systematic risk can be controlled, but only by a costly reductionin expected returns. 2. If the market expected the growth rate in the coming year to be 2 percent, then there would be nochange in security prices if this expectation had been fully anticipated and priced. However, if themarket had been expecting a growth rate different than 2 percent and the expectation was incorporatedinto security prices, then the government’s announcement would most likely cause security prices ingeneral to change; prices would typically drop if the anticipated growth rate had been more than2 percent, and prices
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RWJ11 - CHAPTER 11 RISK AND RETURN Answers to Concepts...

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