1. Considering the Capital Asset Pricing Model, which of the following observations is incorrect?
In a well-diversified portfolio, unsystematic risk can be largely diversified away.
Systematic risk is considered to be a diversifiable risk.
Total risk is the sum of systematic risk and unsystematic risk.
Systematic risk reflects the co-movement of a stock with the market portfolio.
Unsystematic risk is specific to the firm.
2. Why Market price and the real value of shares are different? What is the implication for CFOs?