Return to Sender
Risk Assessment
The Diversification Station
Master of Beta & CAPM
Fun
100

You bought a share of stock for $20 and sold it a year later for $35. The $15 profit you made on the price increase is known by this specific term.

capital gains 

100

A sudden surge in nationwide inflation causes the Federal Reserve to raise interest rates, causing prices across the whole stock market to dip. This represents this broad type of risk

systemic risk 

100

This famous, classic proverb serves as the primary rule for portfolio diversification.

 What is "Don't put all your eggs in one basket"?

100

The overall stock market benchmark always carries a Beta rating equal to this number

1

100

This animal is the largest mammal in the world

blue whale

200

A corporation distributes a portion of its corporate profits directly to shareholders in the form of cash payments.

dividend

200

A major labor strike shuts down production at a single car manufacturing company. This incident is an example of this company-specific risk.

What is unsystematic risk (or company risk)?

200

According to the lesson slides, holding a mix of this specific range of stocks across varied industries wipes out almost all unsystematic risk.

10-15 stocks

200

Utilities and grocery store chains tend to have a Beta under 1.0, earning them this classification because their prices swing less than the market.

defensive stock

200

A group of crows is known by this

murder

300

Before buying a stock, Maya calculates a planned 10% gain. After selling a year later during a downturn, her actual return is a 2% loss. The 2% loss is classified as this type of return

realized return

300

The slide deck compares investment risk to this amusement park ride because higher-risk stocks experience wider price swings up and down.

roller coaster

300

In a properly diversified portfolio, if a retail company suffers a major loss, this offsetting event keeps the portfolio balanced

What are gains from other companies in different industries?

300

A tech company has an aggressive Beta of 1.5. If the overall market jumps by 10%, this stock is expected to jump by this percentage.

15%

300

This marine animal has three hearts and blue blood.

octopus 

400

An investor buys 100 shares of stock at $10 each ($1,000 total). Over the year, they collect $0.50 per share in dividends, but the stock price falls to $9.00 per share by the time they sell. This is their total dollar realized return.

-50

400

An investor buys shares in 30 different companies, but every single company is in the video game development industry. This is the main reason why unsystematic risk was not eliminated.

What is not spreading investments across completely different industries?

400

An investor currently holds shares in 5 different computer software firms. Name two non-tech industries they should invest in next to diversify.

What are utilities, healthcare, retail, energy, or consumer goods?

400

 In the Capital Asset Pricing Model formula, $R_{rf}$ stands for this guaranteed benchmark, typically measured using U.S. Treasury bills.

What is the risk-free rate?

400

This flightless Australian bird appears on the country’s coat of arms alongside the kangaroo

emu

500

Relying strictly on this metric before purchasing a stock is dangerous because it represents hope rather than real-world outcomes.

expected return 

500

This specific type of risk cannot be eliminated through portfolio planning or diversification because all stocks tend to react to major economic news.

What is systematic risk (or market risk)?

500

When an investor successfully uses diversification to eliminate all company risk, this is the only type of risk remaining in their portfolio

What is systematic risk (or market risk)?

500

If the CAPM required return formula calculates a benchmark of 8%, but an analyst projects that the stock will actually return 11% in reality, the stock is considered this.

undervalued 

500

A snail can sleep for this many years at a time during extreme weather

3