Difference between systematic and unsystematic risk

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Reference no: EM132040825

1. You find a certain stock that had returns of 4 percent, -5 percent, -15 percent, and 16 percent for four of the last five years. The average return of the stock for the 5-year period was 13 percent. What is the standard deviation of the stock's returns for the five-year period? Show your calculations/formulas.... NOT THROUGH EXCEL or a SPREADSHEET.

2. You've observed the following returns on Crash-n-Burn Computer's stock over the past five years: 3 percent, -10 percent, 24 percent, 22 percent, and 12 percent. Suppose the average inflation rate over this time period was 3.6 percent and the average T-bill rate was 4.8 percent. Based on this information, what was the average nominal risk premium? Show your calculations/formulas.... NOT THROUGH EXCEL or a SPREADSHEET.

3. Explain the difference between systematic and unsystematic risk. Also explain why one of these types of risks is rewarded with a risk premium while the other type is not.

Reference no: EM132040825

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