Asked by Andrea Madison on Jun 28, 2024
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No matter how much total risk an asset has, only the unsystematic portion is relevant in determining the expected return on that asset.
Unsystematic Portion
The segment of risk in an investment portfolio that can be mitigated through diversification, specific to individual securities.
Expected Return
The weighted average of all possible returns for an investment, with weights representing the probabilities of each outcome.
Total Risk
The entire range of uncertainties including market and specific risks that affect the value of an investment.
- Understand the divergences between systematic and unsystematic risk.
- Discern the repercussions various risks enact on the worth and returns of assets.
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Learning Objectives
- Understand the divergences between systematic and unsystematic risk.
- Discern the repercussions various risks enact on the worth and returns of assets.
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