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Unformatted text preview: n-diversifiable. Total risk declines until the portfolio consists
of around 15-20 securities, then for each additional security in the portfolio the decline becomes very slight. Please click the advert Try this... Challenging? Not challenging? Try more www.alloptions.nl/life
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30 Corporate Finance Risk, return and opportunity cost of capital Portfolio risk
Total risk = Unique risk + Market risk
– – Risk factors affecting only a single assets or a small group of assets
o Idiosyncratic risk
o Unsystematic risk
o Company-unique risk
o Diversifiable risk
o Firm specific risk
o A strike among the workers of a company, an increase in the interest
rate a company pays on its short-term debt by its bank, a product
liability suit. Market risk
– – Economy-wide sources of risk that affects the overall stock market. Thus, market
risk influences a large number of assets, each to a greater or lesser extent.
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This note was uploaded on 10/26/2012 for the course 19 19 taught by Professor - during the Spring '12 term at Sunway University College.
- Spring '12