Question
All of your wealth has been invested in a well diversified portfolio consisting of many assets. You have read an article in the Wall Street
All of your wealth has been invested in a well diversified portfolio consisting of many assets. You have read an article in the Wall Street Journal that has convinced you to consider increasing your position in X Corp. stock. If you decide to buy this stock, its value would account for a very small percentage of your overall wealth.
When evaluating X Corp. stock's risk, you should consider...
a. | first its systematic risk (Beta) and then its total risk (Sigma) | |
b. | its unsystematic risk, measured using (1 - rho)xSigma, where rho is the correlation with the rate of return on the market portfolio. | |
c. | its total risk measured using Sigma (s.d. of return) | |
d. | its systematic risk measured using Beta |
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