Explain what the diversifiable risk associated with an asset means, paying specific attention… 1 answer below »

Explain what the diversifiable risk associated with an asset means, paying specific attention to what causes this risk, Its characteristics and whether it can be controlled and minimised. (4) 4.1.2. Explain what the non-dlversiflable risk associated with an asset means, paying specific attention to what causes this risk, Its characteristics and whether it can be controlled and minimised, (8)

Joe Tau is the financial manager of Focus Engineering (Pty) Ltd. The company has to invest in a new computer-controlled milling machine and Joe is very much aware of the fact that the return on this investment can vary from expectations. This possible variability in return is what constitutes the risk of the investment. To determine the risk associated with this investment, Joe has to calculate the return, standard deviation and coefficient of variation for the investment. Joe has gathered the following investment information for this purpose:

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