All categories

2 years ago

A security with a level of systematic risk that is the same as that of the market has a beta that is

Business

1 answer:

dybincka [34]2 years ago

3 0

Answer:

equal to 1

Explanation:

Beta refers to a coefficient that denotes the degree of responsiveness of security returns with respect to that of market return. Beta is calculated as,

= $\frac{Change\ in\ security\ return}{Change\ in\ market\ return}$

which further means, beta is equal to deviation (risk) in security return w.r.t deviation (risk) in market return.

Beta is a measure of systematic risk which is, the market related risk to which whole of stock market is exposed to. Examples of systematic risk would be, change in the inflation rate, political instability, change in state of economy such as boom or recession, etc.

Systematic risk is not a company specific risk and thus, such a risk cannot be eliminated by a company via diversification of investments.

Thus, for a security whose systematic risk is equal to that of the market , it's beta will be equal to one which means the magnitude by which, the market falls or rises, the stock shall also fall or rise by the same margin. It also means the same direction of movement i.e if market rises, stock price would rise by same proportion and vice versa.

You might be interested in

Fairfield company's raw materials inventory transactions for the most recent month are summarized here: beginning raw materials

astraxan [27]

<u>Calculation of raw materials cost added to the work in process inventory account during the period:</u>

Raw materials issued using materials requisition 1445 for Job 101 = $25,000

Add: Raw materials issued using materials requisition 1446 for Job 102 = $35,000

Add: Materials requisition 1447 used on multiple jobs 1= $30,000

Total raw materials cost added to the work in process inventory account during the period =<u> $90,000</u>

4 0

3 years ago

You have just purchased a car and, to fund the purchase, you borrowed $31,000. If your monthly payments are $493.25 for the next

Free_Kalibri [48]

Answer:

4.56%

Explanation:

The annual percentage rate refers to the rate at which the loan amount is equal to the present value of cash flows

In mathematically

Loan amount = Present value of cash flows

Loan amount = Monthly payment × PVAF (rate, number of years)

$31,000 = $493.25 × PVAF (rate, 72 months)

So,

PVAF (rate, 72 months) = 62.8485

And, the monthly rate is = 0.38%

So, the APR is

= Monthly rate × total number of months in a year

= 0.38% × 12

= 4.56%

The 72 months is

= 6 years × 12 months

= 72 months

7 0

3 years ago

When a US company purchases and imports wood from Brazil to use to build new houses, within the United States, this purchase inc

Mariana [72]

Answer:

The correct answer is 2. No overall change.

Explanation:

The aggregate demand is the total goods and services demanded by a country, at a certain price level, in a certain period of time.

The aggregate demand that can be accounted for measures exactly the same as GDP. So they are often used as synonyms.

To calculate aggregate demand, the same methods as for calculating GDP can be used, however, aggregate demand is associated with expenditure, so it is calculated by the product method, that is, from the point of view of what society has spent. This calculation takes into account the expenditure of families (private individuals), what has been spent on investment, the cost of public administrations, and finally, net exports, which is the difference between imports and exports In this way, the Aggregate Demand formula would look like this:

DA = C + I + G + (X-M)

3 0

3 years ago

Which of the following is true about corporate cultures?a. Corporate cultures are not influenced by the people comprising that o

vladimir1956 [14]

Answer:

Corporate cultures can hinder individuals in making the "right" decisions.-c.

6 0

3 years ago

Read 2 more answers

In 1903, for the first time in u.s. history, congress passed a law declaring that a person holding a specific political viewpoin

mojhsa [17]

In 1903, the congress passed a law declaring that a person holding a specific political viewpoint could be banned from entering the nation, these were the <u>anarchists</u>.

<h3>Who are the anarchists?</h3>

These are group of people that holds the theory that is skeptical of the justification of authority and power, they pursues that cluster of doctrines and attitudes centered on the belief that government is both harmful and unnecessary.

The first person to be call an anarchist was the French writer called Pierre-Joseph Proudhon. In his study, he argued that the real laws of society have nothing to do with authority but rather stem from the nature of society itself and he foresaw the eventual dissolution of authority and the emergence of a natural social order.