Question
Two assets with the same total risk can have very different systematic risks. Suppose that the market volatility ( M ) is 20% and that
Two assets with the same total risk can have very different systematic risks.
Suppose that the market volatility (σM) is 20% and that Stock 1 and Stock 2 have the following characteristics:
| Stock | Business | Market beta | Residual variance |
| 1 | Oil company | 0.5 | 0.20 |
| 2 | Telecommunications | 1.5 | 0.12 |
The percentage of the systematic risk out of the total risk for Stock 1 is closest to _______;
The percentage of the systematic risk out of the total risk for Stock 2 is closest to _______.
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
