Differences between systematic and nonsystematic risk

Return, Risk, and the Security Market Line

Consider the following as you read:

What are the differences between systematic and nonsystematic risk?

#2 Information and Market Returns [LO3] (Professor Question)

Information and Market Returns [LO3] Suppose the government announces that, based on a just-completed survey, the growth rate in the economy is likely to be 2 percent in the coming year, as compared to 5 percent for the past year. Will security prices increase, decrease, or stay the same following this announcement? Does it make any difference whether the 2 percent figure was anticipated by the market? Explain.

#3 Cost of Capital

Consider the following as you read:

What is the definition of weighted average cost of capital?

#4 Project Risk [LO5] (Professor Question)

Project Risk [LO5] If you can borrow all the money you need for a project at 6 percent, doesn’t it follow that 6 percent is your cost of capital for the project?

#5 Capital Structure Goal [LO1] (Professor Question)

Capital Structure Goal [LO1] What is the basic goal of financial management with regard to capital structure?

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