Asked by Danique Mcfarlane on May 03, 2024
Verified
Systematic risk is considered important because ________________________.
A) It is needed in order to measure the total risk of an asset.
B) The risk premium depends only on this type of risk.
C) The market does not provide a reward for this type of risk.
D) The risk premium depends on both systematic and unsystematic risk.
E) Investors are willing to pay more for stocks with high systematic risk components.
Systematic Risk
The danger that applies to the whole market or a section of the market, which cannot be mitigated by diversifying investments.
Risk Premium
The additional return expected by an investor for taking on a higher risk compared to a risk-free asset.
Total Risk
The complete range of uncertainties including market, credit, liquidity, and operational risks that can affect the performance and valuation of investments.
- Understand the fundamentals of the Capital Asset Pricing Model (CAPM) and its impact on anticipated returns.
Verified Answer
Learning Objectives
- Understand the fundamentals of the Capital Asset Pricing Model (CAPM) and its impact on anticipated returns.
Related questions
Which of the Following Is Correct Regarding the CAPM ...
The Reward for Bearing Risk in the Financial Markets Is ...
Stock a Has an Expected Return of 12%,a Beta of ...
Consider the Following Information for Three Stocks,A,B,and C,and Portfolios of ...
Diversifiable Risk Is an Important Factor in the Arbitrage Pricing ...