Theory (Week 7) Flashcards
1
Q
What is unsystematic risk?
A
Risks unique to the industry.
2
Q
What is systematic risk?
A
Market-wide risks affecting all industries.
3
Q
What’s one way UNsystematic risk can be eliminated?
A
By having a diversified portfolio,
4
Q
What’s one way systematic risk can be eliminated?
A
It can’t be eliminated by investors.
5
Q
What is the risk-free rate?
A
A theoretical ROR of an investment with zero risk.
6
Q
How do you calculate real risk rate?
A
Inflation Rate - Yield of the Treasury Bond
7
Q
How is the Average Market Return calculated?
A
The annual growth in the FTSE index.
8
Q
What is the beta factor?
A
Beta (β) compares a stock or portfolio’s volatility or systematic risk to the market.
9
Q
A
