Finance 100

Finance Finance 100 Assignment 2 STRAYER UNIVERSITY Instructor:  prof Ahmad Zia Rawish Finance 100 11/28/2011 Identify the components of a derivations know return. The realized return on a stock is the total return that happens over a specify period of time. To compute the realized return, the components that must be considered ar the dividend yield and capital gain yield. The sum of these two components is the realized return. This is also called the total return. (Berk, J., DeMarzo, P., & Harford, J. (2009)) Contrast systematic and irregular happen. Fluctuations of a stocks return that are collect to market-wide news represent habitual put on the line. An example of a common risk would be Earthquakes. All stocks would fluctuate based on this one event. This type of risk is referred to systematic risk. When fluctuations in a stocks performance are based on industry specific news, it is called independent risks. These are also referred to as unsystematic risk. (Berk, J., DeMarzo, P., & Harford, J. (2009)) Explain why the total risk of a portfolio is non simply follow to the weighted just of the risks of the securities in the portfolio.

The reason behind the total risk not being equal to risk of securities in the portfolio is because the portfolio is always diversified. diversification reduces the overall total risk of the portfolio. However, not all risks cornerstone be removed. Virtually all securities, bonds, and stocks have same and equal systematic risk. This risk cannot be eliminated. However, investors can construct a diversified portfolio to eliminate a portion but not all of this systematic risk. So basically, the inability of diversification to be used to totally eliminate systematic risk, causes the total risk of the portfolio not being equal to the weighted average risks of the securities in the portfolio. (Berk, J., DeMarzo, P., & Harford, J. (2009)) State what beta measures and its uses. Beta can... If you want to condense a full essay, order it on our website: Orderessay

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