session 5

Question 1

higher the risk

Answer 1

higher the return

you can see it with the standar deviation

Question 2

SOURCES OF RISK
AFFECTING PORTFOLIOS

acroeconomic
factors

Answer 2

• Inflation rate
• Interest rate
• Business cycle

Question 3

SOURCES OF RISK
AFFECTING PORTFOLIOS

Micro- / firmspecific factors

Answer 3

• Management
  style
• New products
  / R&D
• Trends

Question 4

if you have two stocks how marco economics facctor affect it

Answer 4

Macro-economic factors
affect both A and B

Question 5

if you have two stocks how micro firm factor affect it

Answer 5

Micro-factors are
different for A and B

Question 6

Market or systematic risk def

Answer 6

risk related to the macro
economic factor or market index, non-diversifiable

Question 6

Non-systematic risk: def

Answer 6

micro-factors, firm-specific,
diversifiable, risk not related to the macro economy

Question 7

total risk formula

Answer 7

Total risk = Systematic + Non-Systematic

Question 11

DIVERSIFICATION OF RISK

* Suppose you owned shares in an airline and an oil company

Answer 11

– We would expect the oil company stock price to rise when oil prices
rise
– We would expect the airline’s stock price to fall when oil prices rise
– Therefore, the effects on the two companies are offsetting, leading to
portfolio returns that have broadly eliminated the risk from oil price
volatility