Understanding the concepts of realized return of the stock, systematic Assignment

Understanding the concepts of realized return of the stock, systematic and unsystematic risk, risk of the portfolio, beta, WACC - Assignment Example Thus the total realized value of the stock is the summation of the realized value of the different assets. Segregating the different factors or components of a stock’s realized return it can be seen that such return is constituted essentially by three main blocks. The first factor reflects the total return that is expected of the stock. Second factor hints on the different economic changes that are taking place in the external world and the effect of such changes on the position of the stock. The third factor endeavors to figure out alterations in the external climate, which tend to render some unique effects on the firm’s stock position. Understanding of the components of realized return of a stock is essential for different stocks tend to reflect different types of sensitivity depending on the various factors. Further through the understanding of the firm’s stock position it becomes easy to infer on the stability position of the firm. (Brigham & Daves, 2009, p. 97; What is a Realized Return?, n.d.). Q.2. Contrast systematic and unsystematic risk A.2. The concept of systematic risks hints at the evolution of risks, which happen not by the occurrence of chance events. These risks rather happen due to the simultaneous occurrence of events, which do not rely on chances. Thus systematic risks are generally undiversified in nature. They can be easily correlated to the occurrence of certain external events. Examples of systematic risks entail changes in the state of economic conditions, which brings in abrupt losses for the economy as a whole. Hence a tight regulation brought about by the monetary organizations causes the rise in the rates of interest for financial concerns. However because of the correlated happenings of these risks due to changes in the economic conditions these risks become simultaneous in nature. Thus it becomes difficult to render insurance schemes covering such risks for these risks go on occurring spontaneously with economic changes. On the other hand the happen ing of unsystematic risks is related to the occurrence of events, which generally take place owing to chance factors. Risks emanating out of chance events cannot be correlated to the occurrences of the events, which are probable, by nature. For example the outbreak of fire in a complex is simply a probabilistic event and depends highly on chance factors. Thus any amount of expected economic loss amounting from such counters an unsystematic risk and can be insured beforehand (Condamin, Louisot, & Naim, p.4). Further the due to certainty measures the amount of systematic risks can be rendered for explanations and also can be easily modeled. On the contrary, the unsystematic risks for the uncertainty factor adhered to it fails to be modeled. (Los, 2001, p.114) Q.3. Explain why the total risk of a portfolio is not simply equal to the weighted average of the risks of the securities in the portfolio. A.3. The total risk of a portfolio is computed based on the variance or standard deviatio n of the different returns emanating out of the different assets of the portfolio. However the variance computed does not depend on the weighted average of the different range of returns amounting from the employment of different assets. Rather the computation of the total risk of the portfolio is done based on the factor of correlation of each asset to other assets employed such. Thus if two assets constitute a certain portfolio then the

Evaluate the renewable energy sector in the Netherlands, using Essay

Evaluate the renewable energy sector in the Netherlands, using Porter's Diamond model - Essay Example The country has one of the most advanced off shore wind industries in the world (Jansen, Ostertag and Waltz, 2011). The renewable energy sector enjoys a top-sector status in the country hence, enjoys exponential and far reaching investment by both government, private sector and even science and technology institutions are encouraged to build capabilities, conduct research and test technologies in the country at subsidized costs (Ibon, Eguino and Anil, 201). For the top-sector, there are top- teams consisting of scientists, senior officials, small and medium enterprise representatives and figureheads in the sector (Matschoss, 2011). These top teams are responsible for identifying necessary adjustments and foreseeable challenges and possible opportunities in the sector and promptly advice the investors, businesses, scientists and the government on the best approach for maximum impact (Lovinfosse, 2008). This pragmatic intervention in the sector has greatly improved innovations in the s ector for the Netherlands. The Netherlands also has an innovation contract in the renewable energy sector which primarily seeks to achieve the realization of European targets with regards to lowering emissions and sourcing at least 14 percent of total national energy consumption from Renewable Energy Sources (RES) that was made available in the year 2012.In the contract are substantive and financial agreements between companies, scientists and the government and its implementation started in 2012 and 2013.Even though not a producer herself, the Netherlands has a strategic locational advantage in terms of pipeline transit for gas for the North-West Europe (Bruekers, 2007). This ambitious measure has been taken by the government ownedcompanies, The Gas Union and EBN (Jeroen and Bruinsma, 2008). Demand Conditions: Renewable energy is extremely popular and enjoys favorable perception among