1. Which one of the following statements is correct concerning unsystematic risk?
a. An investor is rewarded for assuming unsystematic risk.
b. Beta measures the level of unsystematic risk inherent in an individual security.
c. Standard deviation is a measure of unsystematic risk.
d. Eliminating unsystematic risk is the responsibility of the individual investor.
e. Unsystematic risk is rewarded when it exceeds the market level of unsystematic risk.
2. You bought one of Great White Shark Repellant Co.’s 8 percent coupon bonds one year ago for $810. These bonds make annual payments and mature 7 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 10 percent. If the inflation rate was 3.7 percent over the past year, what was your total real return on investment?
16.98%
17.83%
17.08%
25.80%
7.46%