SYSTEMATIC VS UNSYSTEMATIC
1.Which of the following risks of a stock are likely to be unsystematic,
diversifiable risks and which are likely to be systematic risks? Which risks
will affect the risk premium that investors will demand?
a . The
1. What does the historical relationship between volatility and return tell us
about investors attitude toward risk?
Ans:The historical relation between volatility and return tells us that investors are
2. What is the reasoning behind us
Q5: What i
s meant by adverse selection? Explain how adverse selection can
private insurance market fail.
Adverseselection refers to a marketprocessthatresultsinundesired resultswhen
Q1: Explain how risk-aversion creates demand for health insurance.
Due to individuals being risk averse, coupled with the uncertainty regarding the
effectiveness of health care and the uncertainty over financial risk, t
Q1: Explain how risk
s demand for health insurance.
Duetoindividualsbeing risk averse, coupledwiththeuncertaintyregarding the
effectivenessof healthcareandthe uncertainty over financialrisk,thisleads to
Q8: Describe the implication the method of health care financin
efficiency roader nomy.
in the b
Theprivate systemtied to employment based insurance coverage constrains individuals
mobility in the labor m
CHAPTER 9 AND 10: CAPITAL BUDGETING
What is capital budgeting, and what is its goal?
A capital budget lists the projects and investments that a company plans to undertake during
years. To create this list, firms analyze alternative projects and dec