What are the two components of total risk

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1. Why is the percentage return a more useful measure than the dollar return?

2. How do the authors of your textbook define risk? How is it measured?

3. What are the two components of total risk? Which component is part of the risk-return relationship? Why?

4. Consider that you have three stocks in your portfolio and wish to add a fourth. You want to know if the fourth stock will make the portfolio riskier or less risky. Explain how this would be assessed using beta as the measure of risk.

5. Why do we use market-based weights instead of book-value-based weights when computing the WACC?

Please answer all of the questions,

Reference no: EM132286957

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