CH06+questions - Chapter 6 Investors in the share market 1....

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Chapter 6 Investors in the share market 1. Identify and briefly discuss important issues that must be considered by an investor in the share investment decision process. 2. (a) Define risk, and distinguish between systematic risk and unsystematic risk. What factors are responsible for the two types of risk? (b) What is the rationale behind the assertion that an investor should not expect to be rewarded for the unsystematic risk element associated with a share? 3. An investor holds the following stocks in an investment portfolio: Ocka Limited $5000 beta 0.7 Techno Limited $7000 beta 1.2 Mega Bank limited $9000 beta 0.8 (a) Explain the beta coefficient for each of the above stocks. (b) What is the level of risk of the portfolio as measured by beta? (c) If the investor added to the above portfolio with the purchase of $8000 worth of shares in Bibs & Bobs Limited (beta 1.3), what impact would that purchase have on the risk structure of the portfolio? 4. Analyse and explain the concept of passive investment. In your answer, describe how a funds manager might use an index fund to achieve a specific performance outcome. 5. Explain the role of a stockbroker in the direct investment approach to share investments. From the perspective of services provided, discuss the two main types of stockbrokers that
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This note was uploaded on 03/26/2012 for the course FINS 2624 taught by Professor Hneryyip during the Three '10 term at University of New South Wales.

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CH06+questions - Chapter 6 Investors in the share market 1....

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