NEWSWIRE - October 8, 2001

Topic: Risk and Return

Source: "A Shock to the Equity Culture," by Bruce Nussbaum, Business Week, October 8, 2001, pages 34-35.

Synopsis of Article: The article discusses the post September 11, 2001 stock market. The dramatic change in world events has created tremendous uncertainty in the U.S. equity markets and has led to a spike in risk. Growth and earnings have become more difficult to forecast and stocks more difficult to value in light of the increase in risk. The article provides an opportunity to discuss different types of risk, e.g., systematic, unsystematic, and political, and their impact on the cost of capital.

Questions :

1. How did the events on September 11, 2000 impact both systematic and unsystematic risk?
2. How have recent economic events affected the cost of capital?
3. What is country risk? Do you think it has been impacted by the events on September 11, 2001?