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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 Download free ebooks at bookboon.com 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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