red There are two types of risk concerning the stock BCM. The total risk of stock BCM is 50% more than the risk for the stock market as a whole. However, the diversifiable risk of stock BCM is 90% higher than the stock market as a whole, whereas the undiversifiable risk of stock BCM is actually 20% less than the stock market as a whole. Assuming the risk free return is 5% and the expected return on the stock market as a whole is 9%, the expected return on stock BCM should be 11.0% 7.2% 8.2% ked 4.5%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 25P
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There are two types of risk concerning the stock BCM. The total risk of
stock BCM is 50% more than the risk for the stock market as a whole.
However, the diversifiable risk of stock BCM is 90% higher than the stock
market as a whole, whereas the undiversifiable risk of stock BCM is
actually 20% less than the stock market as a whole. Assuming the risk free
return is 5% and the expected return on the stock market as a whole is 9%,
the expected return on stock BCM should be
11.0%
7.2%
8.2%
ked
4.5%
Transcribed Image Text:red There are two types of risk concerning the stock BCM. The total risk of stock BCM is 50% more than the risk for the stock market as a whole. However, the diversifiable risk of stock BCM is 90% higher than the stock market as a whole, whereas the undiversifiable risk of stock BCM is actually 20% less than the stock market as a whole. Assuming the risk free return is 5% and the expected return on the stock market as a whole is 9%, the expected return on stock BCM should be 11.0% 7.2% 8.2% ked 4.5%
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