Business, 30.10.2019 04:31 twistedhyperboles

Chapter 12 homework 1. diversifiable risk. in light of what you’ve learned about market versus diversifiable (specific) risks, explain why an insurance company has no problem in selling life insurance to individuals but is reluctant to issue policies insuring against flood damage to residents of coastal areas. why don’t the insurance companies simply charge coastal residents a premium that reflects the actuarial probability of damage from hurricanes and other storms? 3. using beta. a stock with a beta of .8 has an expected rate of return of 12%. if the market return this year turns out to be 5 percentage points below expectations, what is your best guess as to the rate of return on the stock? 11. capm and expected return. if the risk-free rate is 6% and the expected rate of return on the market portfolio is 13%, is a security with a beta of 1.25 and an expected rate of return of 16% overpriced or underpriced?

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Chapter 12 homework 1. diversifiable risk. in light of what you’ve learned about market versus diver...

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