The return on any stock traded in a financial market is composed of two parts. First, the normal, or expected, return from the stock is the part of the return that shareholders in the market predict or expect. The second part of the return on the stock is the uncertain, or risk, part. This is the portion that comes from unexpected information revealed within the year. The first type of surprise is Systematic Risk and the second type of surprise is Unsystematic Risk. ( 10 Points)

A. Please describe Systematic and Unsystematic Risk. Please provide examples of each.

B. Please describe Diversification and the role it plays with Systematic and Unsystematic Risk. What is the benefit and how does diversification accomplish this benefit?

C. Please describe Beta and Standard Deviation and the role they play with Systematic and Unsystematic Risk.