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Differentiate systematic and non-systematic risk

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Question1. Suppose that the risk free rate of interest is 3 percent and the expected rate of return on the market is 9 percent. A share of stock is selling for $55 at the beginning of the year. It will pay a dividend of $2 per share at the end of the year. Its beta is 1.2. What do investors expect the stock to sell for at the end of the year?

Question2. The risk-free rate is again 3%. The expected return on the market is 9%. A particular security offers an expected return of 2 percent. Assuming that capital markets are in equilibrium, what is the beta of this security?

Question3. What is the difference between systematic risk and nonsystematic risk?

 

Reference no: EM1373154

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