FIN222 Lecture 4: Risk and Return

A maximum reduction in portfolio risk occurs when the correlation coefficient between the two stocks is equal to....

The risk premium of a share is not affected by unsystematic risk.  

• True

• False

Beta is a measure of.....

• Total Risk

• Unsystematic Risk

• Systematic Risk

Resignation of a firm’s chief financial officer is a source of systematic risk.

• True

• False

Which of the following is TRUE?

• Systematic risk is diversifiable

• A stock beta of 0.85 indicates that the stock is riskier than the market. 

• If realised return is greater than the required return, “Buy or Hold” would be recommended.

• Resignation of a firm’s chief financial officer is a source of systematic risk