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4.1 What are the different components of risk? How and what component of the risk can be reduc by diversification, (explain by example)? 4.2 After
4.1 What are the different components of risk? How and what component of the risk can be reduc by diversification, (explain by example)? 4.2 After his last movie "No Time To Die" as a James Bond, Daniel Craig invests 60% of his funds FT50 stock and the balance in CAC40. The standard deviation of returns on FT50 is 10%, an on CAC40 is 20%. Calculate the variance and standard deviation of portfolio returns, assuming a) The correlation between the returns is 1.0 b) The correlation between the returns is 0.5 c) The correlation between the returns is 0.0 [03 points [03 points [03 points 4.3 Epsilon Corp. is evaluating an expansion of its business. The cash flow forecasts for the projec are as follows: The firm's existing assets have a beta of 1.4. The risk-free interest rate is 4% and the expected return on the market porffolio is 12%. What is required rate of return for Epsilon Corp
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