Genesis Corporation has been in business for 10 years and went public 5 years ago. A friend of yours is interested in buying the stock and, as they know you have learned how to calculate stocks and bonds in your finance class, they have come to you for help in understanding stock prices and what can influence them.

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(4 marks) Assuming a risk-free rate of 4%, a market return of 11% , and a stock's beta of 1.2, what is the estimated stock price of Genesis according to the CAPM?

b. (6 marks) There are two types of risk (systematic and unsystematic) that relate to unexpected returns that in turn will influence the price of an asset. Provide a brief explanation of each type, including identifying which one can be best managed through diversification.