1 Systematic risk affects no firm if it is well diversified all firms only firms in a single industry only individual firms 2 Factors that create systematic risk include Check all that apply earnings surprises inflation interest rates exchange rates the business cycle 3 Unsystematic risk Check all that apply affects only a single asset or small group of assets is measured by standard deviation can be diversified away is eliminated in a well diversified portfolio 4 The following table shows realized rates of return for two stocks A B C 1 Year Stock A Stock B 2 1 14 13 3 2 27 14 4 3 6 5 5 4 5 28 6 5 14 8 7 6 20 7 a What is the arithmetic average return for stock B b What is the covariance of returns

Question

1  Systematic risk affects        no firm if it is well diversified all firms only firms in a single industry only individual firms 2  Factors that create systematic risk include        Check all that apply  earnings surprises inflation interest rates exchange rates the business cycle 3  Unsystematic risk        Check all that apply  affects only a single asset or small group of assets is measured by standard deviation can be diversified away is eliminated in a well diversified portfolio 4  The following table shows realized rates of return for two stocks  A B C 1 Year Stock A Stock B 2 1 14  13  3 2  27   14  4 3  6   5  5 4 5  28  6 5 14  8  7 6 20  7  a  What is the arithmetic average return for stock B  b  What is the covariance of returns

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	A	B	C
1	Year	Stock A	Stock B
2	1	14%	13%
3	2	-27%	-14%
4	3	-6%	-5%
5	4	5%	28%
6	5	14%	8%
7	6	20%	7%

Question: 1. Systematic risk affects _____. no firm if it is well diversified all firms only firms in a single industry only individual firms 2. Factors

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