Asked by Micah Awisus on Jul 02, 2024
Verified
Nondiversifiable risk is also referred to as
A) systematic riskor unique risk.
B) systematic riskor market risk.
C) unique riskor market risk.
D) unique riskor firm-specific risk.
Nondiversifiable Risk
The portion of an investment's risk that cannot be eliminated through diversification, often associated with market-wide risks.
Systematic Risk
The danger that affects the whole market or a part of the market, which cannot be reduced by diversifying investments.
Unique Risk
A risk that affects a very small number of assets, also known as unsystematic risk, specific risk, or idiosyncratic risk, and can be largely eliminated by diversification.
- Describe and compare systematic versus nonsystematic risks.
- Discern among diverse risk types, namely market risk, unique risk, firm-specific risk, and diversifiable risk.
Verified Answer
SS
Simranjeet Singh5 days ago
Final Answer :
B
Explanation :
Nondiversifiable risk, which affects all investments and is linked to factors like economic, political, and social changes, is also known as systematic risk or market risk. Unique risk or firm-specific risk, on the other hand, can be diversified away.
Learning Objectives
- Describe and compare systematic versus nonsystematic risks.
- Discern among diverse risk types, namely market risk, unique risk, firm-specific risk, and diversifiable risk.