Financial risk and return
Free IMA CMA Part 2 (Strategic Financial Management) lesson in Corporate Finance. 10 min read, ~1,562 words.
Total risk = systematic + unsystematic. Only systematic (market) risk is priced because the rest diversifies away. CAPM: Expected return = R_f + β(R_m − R_f). Market beta is 1.0 by definition. Diversification removes unsystematic risk; 20 to 30 reasonably uncorrelated securities captures most of the benefit when correlations are...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 2B1
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