Question: QUESTION 1 (20 MARKS) (a) Define diversification and explain its effects on systematic and unsystematic risk. (4 marks) (b) Differentiate between perfect negative correlation and

QUESTION 1 (20 MARKS)

(a) Define diversification and explain its effects on systematic and unsystematic risk.

(4 marks)

(b) Differentiate between perfect negative correlation and perfect positive relation.

(6 marks)

(c) Hairul is considering to buy the ordinary shares of One Berhad and Two Berhad. The possible returns for the companies shares next year are as follows:

State of economy	Probability	Rate of return (r)
		One Berhad %	Two Berhad %
Normal	0.4	20	19
Growth	0.6	25	28

i. Calculate the expected return of the shares.

(2 marks)

ii. Calculate the variance for each share

(4 marks)

iii. Calculate the standard deviation of each share.

(4 marks)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related General Management Questions!

(a) Define diversification and explain its effects on systematic and unsystematic risk. (4 marks) (b) Differentiate between perfect negative correlation and perfect positive relation. (6 marks) (c)...

i already asked the same question twice, this is the third time. i need all the answers Part 2 ( 25 marks) - risk and return Yous are considering investing in stocks and thw isentified the following...

QUESTION 1 (20 MARKS) A. State TWO (2) characteristics of a private debt. (2marks) B. Consider two 20 years bond with annual coupon payments. Bond A has an 8 percent coupon rate and bond B has a 4...

SECTION C: TWO (2) SHORT ANSWER QUESTIONS [30 marks] Please answer all Question 1 [15 marks] a. Define systematic and unsystematic risk. Give an example of each. How can you reduce the systematic...

SECTION A [40 Marks] Read the article below and answer ALL the questions that follow. Tax and fiscal policy in response to the Coronavirus crisis: Strengthening confidence and resilience Policy...

Question a) Differentiate between perfect negative correlation and perfect positive correlation. (5 marks) b) Explain the concept of diversification in investment portfolio. (5 marks) c) A stock's...

Question 1 - 20 marks (sections a and b: 1-3 sentences, c and d: 2-5 sentences) Geralt and Yennifer have travelled to Tasmania where they are free from any stress, duress and able to behave...

Read the following case study and answer the questions that follow. What is the Role of New Technologies in Public Systems Management? New Technologies Role in Public Systems Management This effort...

answer me;; it completete and okay. Robert Chilufya's employer offers its workers a two-month paid sabbatical every seven years. Robert, who just started working for the firm, plans to spend his...

(4) Given 4-12-31 A = (i) dimensions of A and B (ii) main diagonal of B (iii) AB (iv) BA (v) determinant of B (vi) inverse of B (vii) matrix of minors of B (viii) matrix of cofactors of B and B= 11...

Refer to Case Study 1, Heart or Hypothalamus? Discuss each of the following components, including whether you think the way it was handled would detract from Salks conclusion: a). Component 3 b)....

Which one of the following statements concerning option holders is FALSE?A ) The upside profit is unlimited but the downside loss potential is limited for a call holder.B ) A call option holder will...

When older adults have difficulty with transportation and communication, or may be reluctant to request needed assistance to which they are entitled, they may be in need of: Group of answer choices...