Question

Choose correct answer Strike in a city (systematic risk / idiosyncratic risk) High inflation (systematic risk...

Choose correct answer

Strike in a city (systematic risk / idiosyncratic risk)

High inflation (systematic risk / idiosyncratic risk)

Recession (systematic risk / idiosyncratic risk)

Hyper interest rates (systematic risk / idiosyncratic risk)

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Systematic risk is risk associated with market returns. This is risk that can be attributed to broad factors. Idiosyncratic risk, also referred to as unsystematic risk, is the risk that is endemic to a particular company or group of companies and not to whole market.

Strike in a city - idiosyncratic risk. Since this risk affects only a set of companies which operate out of that city region.

High inflation - systematic risk. Since this risk affects whole market.

Recession - systematic risk. Since this risk affects whole market.

Hyper interest rates - systematic risk. Since this risk affects whole market.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which one of the following statements is correct? The risk-free rate is zero if inflation is...
Which one of the following statements is correct? The risk-free rate is zero if inflation is equal to the nominal rate Any return greater than the inflation rate represents the risk premium. Inflation rates are always positive. Nominal rates exceed real rates by the amount of the risk-free rate. The real rate is negative if inflation exceeds the nominal rate
Which of the following is NOT a systematic risk? (Multiple choice) A. The risk that the...
Which of the following is NOT a systematic risk? (Multiple choice) A. The risk that the inflation is falling below zero B. The risk that the Federal Reserve lowers interest rate C. The risk that FDA rejects a potential drug by a major pharmaceutical company for treating cancer D. The risk that the economy slows down E. The risk that a global pandemic severely impacts the health of humans
Which of the following statements is CORRECT? Group of answer choices The risk that cashflows will...
Which of the following statements is CORRECT? Group of answer choices The risk that cashflows will have to be reinvested in the future at lower rates, pushes investors to require higher rates from shorter term bonds, compared to similar longer term bonds. The longer the time to maturity, the greater the change in the value of a bond in response to a given change in interest rates. All of the above are correct. None of the above is correct.
When credit/ risk spread is observed to be high, it indicates - expansion and high-interest rate...
When credit/ risk spread is observed to be high, it indicates - expansion and high-interest rate risk -recession as and high default rate risk
Suppose that we have identified three important systematic risk factors given by exports, inflation, and industrial...
Suppose that we have identified three important systematic risk factors given by exports, inflation, and industrial production. In the beginning of the year, growth in these three factors is estimated at -1%, 2.5%, and 3.5% respectively. However, actual growth in these factors turns out to be 1%, -2%, and 2%. The factor betas are given by bEX = 1.8, bI = 0.7, and bIP = 1.0. The company announces that they had an industrial accident and the operating facilities will...
Which two of the following five statements are correct? Select two alternatives: A risk-averse investor will...
Which two of the following five statements are correct? Select two alternatives: A risk-averse investor will avoid investing in stocks. Diversification eliminates systematic risk but not idiosyncratic risk. The 95% confidence interval for the expected return is defined as the Historical Average Return plus or minus three standard errors. The realized return is the total return we earn from dividends and capital gains, expressed as a percentage of the initial stock price. While there is no clear relationship between risk...
1.Which of the following statement is not true about interest rate risk? (Only one correct answer.)...
1.Which of the following statement is not true about interest rate risk? (Only one correct answer.) Select one: a. Bond prices are negatively related to interest rate movements. b. Lower coupon bonds have lower interest rate risk. c. Long term bonds have higher interest rate risk than short term bonds. d. Interest rate risk is the uncertainty of how the bond price will change following the interest rate changes. 2.Which one of the following statements best describes two mutually exclusive...
What would most likely affect a particular company's systematic risk? select correct number. 1. According to...
What would most likely affect a particular company's systematic risk? select correct number. 1. According to the U.S. government, inflation is expected to increase during the next five years 2. There is a good chance that a trade war affects the sales of the US firms in the near future. 3. Next year the company plans to introduce a new product line that has a 30 percent chance of failing 4. The firm's sales this year probably will substantially lower...
Which of the following are correct? I. If expected inflation increases, investors will consider selling bonds...
Which of the following are correct? I. If expected inflation increases, investors will consider selling bonds as the real value of this investment will decrease and bond yields should increase. II. Reinvestment risk occurs when interest rates decrease so that coupons from a bond are reinvested at a lower rate than originally expected. III. If interest rates are expected to increase, an investor should consider selling long-maturity bonds and buying short-maturity bonds to decrease portfolio duration. IV. If the risk...
Suppose that the market can be described by the following three sources of systematic risk with...
Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. Factor Risk Premium Industrial production (I) 8% Interest rates (R) 4 Consumer confidence (C) 6 The return on a particular stock is generated according to the following equation: r = 16% + 1.6I + 0.8R + 1.30C + e a-1. Find the equilibrium rate of return on this stock using the APT. The T-bill rate is 4%. (Do not round intermediate...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT