Question: Please help me with the question below: All your wealth has been invested in a well-diversified portfolio consisting of many assets. You have read an
Please help me with the question below:
All your wealth has been invested in a well-diversified portfolio consisting of many assets. You have read an article in the Wall Street Journal that has convinced you to consider increasing your position in X Corp. stock. If you decide to buy this stock, its value would account for a very small percentage of your overall wealth. When evaluating X Corp. stocks risk, you should consider
A. first its systematic risk (Beta) and then its total risk (sigma)
B. its systematic risk measured using Beta
C. its total risk measured using Sigma (s. d. of return)
D. its unsystematic risk, measured using (1-rho)xSigma, where rho is the correlation with the rate of return on the market portfolio.
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