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Studentka2010 [4]
4 years ago
6

You expect General Motors​ (GM) to have a beta of 1.3 over the next year and the beta of Exxon Mobil​ (XOM) to be 0.9 over the n

ext year.​ Also, you expect the volatility of General Motors to be​ 40% and that of Exxon Mobil to be​ 30% over the next year. Which stock has more systematic​ risk? Which stock has more total​ risk?
Business
1 answer:
Temka [501]4 years ago
8 0

Answer:

As the beta of GM (1.3) is more than that of XOM (0.9), GM has more systematic risk than XOM.

The volatility of GM (40%) is higher than that of XOM (30%). Thus, GM has a higher total risk than XOM.

Explanation:

The systematic risk is the risk caused by factors that affect all of the market and are unavoidable. Such a risk is also known as a market risk and is measured by the beta of a stock. The market beta is always 1. A stock having a beta higher than 1 has higher systematic risk than market and a stock having a lower beta than 1 has a lower systematic risk than the market.

As the beta of GM (1.3) is more than that of XOM (0.9), GM has more systematic risk than XOM.

Total risk, on the other hand, is the risk that comprises of both systematic and unsystematic risk. The systematic risk is the market risk as mentioned above while the unsystematic risk is the firm specific risk and is avoidable. The total risk is measured by the standard deviation or volatility of the stock. The stock with higher volatility has higher total risk and vice versa.

The volatility of GM (40%) is higher than that of XOM (30%). Thus, GM has a higher total risk than XOM.

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8 0
2 years ago
If government purchases increase by $10 billion and the economy's mpc is. 8, the aggregate demand curve will shift _____
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If government purchases increase by $10 billion and the economy's MPC is. 8, the aggregate demand curve will shift <u>rightward by $50 billion at each price level.</u>

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5 0
2 years ago
Velco purchased a delivery truck at the beginning of Year 1 at a cost of $60,000. The truck is estimated to have a useful life t
Alenkinab [10]

Answer:

$10,000

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In july, lane co. Sells merchandise to avery co. On account. In august, avery pays the balance in full. The entry that lane will
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