Consider a Day on Which the S&P/TSX 60 Index, an Index

question 327

Essay

Consider a day on which the S&P/TSX 60 Index, an index of 60 large stocks, rose 59 points. On
that same day, Alcan, which is one of the stocks in the Index, announced some unexpectedly bad
news. The price of Alcan declined $10 on that same day. Using this example, discuss systematic
risk, portfolio diversification, and asset specific risk.

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Definitions:

Consolidated Statement

Financial statements that aggregate the financial information of a parent company and its subsidiaries into one document.

Acquisition

The process of obtaining control of another company or business entity through purchase or merger.

Carrying Amount

The book value of an asset or liability on a company's financial statement, reflecting its accounting value rather than market value.

Investing Cash Flow

Cash inflows and outflows related to transactions involving the acquisition and disposal of long-term assets and investments not included in cash equivalents.