Question 5 (60 points): Capital Market History, Systematic Risk and the Cost of Capital (Please write 5 lines or less fo

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Question 5 60 Points Capital Market History Systematic Risk And The Cost Of Capital Please Write 5 Lines Or Less Fo 1 (59.12 KiB) Viewed 32 times

Question 5 (60 points): Capital Market History, Systematic Risk and the Cost of Capital (Please write 5 lines or less for each response) (15 minutes) a) Explain in your own words the meaning of "systematic risk" and "unsystematic risk"? Provide an example of each type of risk. (2/3 lines) b) Why is there is less unsystematic risk in a portfolio with many stocks- Explain why and how unsystematic risk gets diversified away? (2/3 lines) c) Suppose Moderna COVID vaccine is approved and it is announced today in the morning at 9AM. According to the efficient market hypothesis, should the price of Moderna stock adjust right away after 9AM? Why? Under what conditions might it adjust slowly over time? (2/3 lines) d) Moderna has a beta of 1.2, the risk-free rate is 4% and the expected return on the market is 10%. Compute the expected return on Moderna. 12:56 PM //