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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 Download free ebooks at 30 Corporate Finance Risk, return and opportunity cost of capital Portfolio risk Total risk = Unique risk + Market risk Unique risk – – – Risk factors affecting only a single assets or a small group of assets Also called o Idiosyncratic risk o Unsystematic risk o Company-unique risk o Diversifiable risk o Firm specific risk Examples: 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. Also called o Syste...
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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.

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