Which of the following is a diversifiable risk? Multiple Choice The risk that the economy will go into a recession The price of oil rising The risk that a company's CEO is killed in a plane crash Inflation The corporate tax rate rising by 5%
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Which of the following is a diversifiable risk?
Multiple Choice
- The risk that the economy will go into a recession
- The price of oil rising
- The risk that a company's CEO is killed in a plane crash
- Inflation
- The corporate tax rate rising by 5%
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- Which of the following is an example of unsystematic risk? XYZ corp stock price fell when the news of a drop in GDP was released. When the new employment numbers showed the economy is creating more jobs, the stock market rose. ABC Manufacturing stock price falls upon the announcement that they have a parts shortage from their suppliers When news of strong consumer demand was released, proctor and gamble stock price rose The stock market rose at the announcement of higher GDP numbersWhich of the following represent diversifiable risks? the president of a company suddenly resigns the economy goes into a recessionary period a company's product is recalled for defects the Federal Reserve unexpectedly changes interest rates Group of answer choices 2 and 4 only 1, 2, and 3 only 1, 2, and 4 only 1, 2, 3, and 4 1 and 3 only1a. Consider the statement that an asset with higher risk must earn higher risk premium. Is it true or false? Please explain. b) A company with growth opportunities has dividend growth every year. Do you agree or not? Please explain. c) The Trump administration lowered corporate tax rate and this is a monetary policy. Is it true or false? If false, what type of policy is it.
- You are considering investing in Ford Motor Company. Which of the following are examples of diversifiable risk? I. Risk resulting from possibility of a stock market crash. II. Risk resulting from uncertainty regarding a possible strike against Ford. III. Risk resulting from an expensive recall of a Ford product. IV. Risk resulting from interest rates decreasing. A. I only B. I, II, III, IV C. II, III D. I and IVSuppose that as the economy moves through a business cycle, risk premiums also change. For example, in a recession, when people are concerned about their jobs, risk tolerance might be lower and risk premiums might be higher. In a booming economy, tolerance for risk might be higher and premiums lower.a. Would a predictably shifting risk premium such as described here be a violation of the efficient market hypothesis?b. How might a cycle of increasing and decreasing risk premiums create an appearance that stock prices “overreact,” first falling excessively and then seeming to recover?Give typing answer with explanation and conclusion Which of the following represent undiversifiable risks? I. The Federal Reserve raises interest rates. II. A product is recalled because of safety problems. III. The economy slips into a recession. IV. The CEO 's divorce settlement forces him to sell off half of his stock holdings.
- You are a fixed income investor who is expecting an upcoming recession (inverted yield curve). What is the best strategy to maximize your fixed income? A Keep money in existing fixed income assets B Move money to the long term because of higher interest rates C Sell off bonds with longer maturities and buy shorter maturity bonds D Purchase only 10 year government bonds to avoid default risk in a recession•Question 1 Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Allos Inc. Returns (RA) Orangus Inc.Returns (Rg) snäur Depression -20% Recession 20% %10% Normal -12% %6 Required: 1. For each company calculate: i. the expected returns ii. the Variance 2. Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, jii. the Standard deviation what will be your portfolio returns? 3. Calculate the Standard deviation of the portfolio.1.Ur CEO believes that economy will go to a recession. Which of the following benchmarks will he choose to implement for his bearish view ? 50 Treasury 50 HY 100% HY 30 Treasury 40 equity 30 HY NONE OF THE ABOVE
- Suppose financial analysts believe that there are four equally likely states of the economy: depression, recession, normal, and boom. The returns on the Supertech Company are expected to follow the economy closely, while the returns on the Slowpoke Company are not. The return predictions are as follows: States of the economy Depression -20% 5% Recession 10% 20% Normal 30% -12% Boom 50% 9% •Required: 1.For each company calculate: i.the expected returns ii.the Variance iii.the Standard deviation 2.For each company calculate and explain: i.The covariance ii.The correlation 3.Assuming you are an investor with GHS100 available. If you invest GHS60 and GHS40 in Allos Inc. and Orangus Inc. respectively, what will be your portfolio returns? 4.Calculate the Standard deviation of the portfolio.QUESTION 1 The chairman of the world's largest asset manager said in his 2020 Annual Letter to Companies that "The financial world is on the edge of a revolution. He went on to explain that this would imply: O The underprivileged in society demanding that wealth was spread more evenly O That new applications of derivative securities would enable a much more effective income re-distribution O That there would be "a realocation of capital" as a result of a change in the risk/ reward profile of different types of asset due to market re-pricing That the "winner take all" syndrome would result in the finance industry having only 5 large asset managers and a few specialised niche providers within 5 years.Finance Political stability is a major factor of which one of the following? business risk inflation risk country risk exchange rate risk 2. Regarding short selling: which one of the following statements is incorrect? Dividends on any stock sold short must be covered by the short seller. There is no time limit on a short sale. Short sales are permitted only on falling prices or a downtick. Short sellers must put up margin as if they had gone long.