Which one of the following statements is an example of unsystematic risk? The number of vehicles sold by a major manufacturer was less than anticipated. GDP was 0.5 percent lower than expected. The inflation rate increased by 5 percent. The value of the dollar declined against the other major currencies.

If the economy booms, RTF, Incorporated, stock is expected to return 10 percent. If the economy goes into a recessionary period, then RTF is expected to only return 3 percent. The probability of a boom is 65 percent while the probability of a recession is 35 percent. What is the variance of the returns on RTF, Incorporated, stock?

Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 5%, and IR 4.0%. A stock with a beta of 2.1 on IP and 1.4 on IR currently is expected to provide a rate of return of 18% . If industrial production actually grows by 6%, while the inflation rate turns out to be 5.8%, what is your revised estimate of the expected rate of return on the stock? Note: Do not round intermediate calculations. Round your answer to 1 decimal place.

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The following question illustrates the APT. Imagine that there are only two pervasive macroeconomic factors. Investments X, Y, and Z have the following sensitivities to these two factors:   Investment b1 b2 X 1.75 0 Y −1.00 2.00 Z 2.00 1.00     We assume that the expected risk premium is 7.8% on factor 1 and 11.8% on factor 2. Treasury bills obviously offer zero risk premium.   According to the APT, what is the risk premium on each of the three stocks? Suppose you buy $500 of X and $125 of Y and sell $375 of Z. What is the sensitivity of your portfolio to each of the two factors? What is the expected risk premium? Suppose you buy $200 of X and $150 of Y and sell $100 of Z. What is the sensitivity of your portfolio to each of the two factors? What is the expected risk premium? Finally, suppose you buy $400 of X and $50 of Y and sell $200 of Z. What is your portfolio's sensitivity now to each of the two factors? And what is the expected risk premium?

As the 2008–2009 financial crisis unfolded, one major U.S. bank had a leverage ratio of 50.In Canada, regulators put a ceiling of 20 on bank leverage ratios. Compare the change inasset values that would push the capital in the U.S. bank to zero with the change requiredto eliminate capital in a Canadian bank at the ceiling-leverage ratio. What is the implicationof the differences in maximum leverage ratios for the stability of the banking system?