Asked by Conner Reiss on Jul 07, 2024
Verified
Systematic risks are defined as:
A) The unique risks inherent to a particular industry or firm.
B) Unexpected events which affect the price of a limited number of securities.
C) Risks which are eliminated in a diversified portfolio.
D) Unexpected events which affect almost all assets.
E) Risks which go unrewarded by the marketplace.
Systematic Risks
Risks that impact the entire market or economy, often unavoidable by diversification.
Diversified Portfolio
An investment strategy that spreads investments across various assets to reduce risk.
- Identify the distinctions between systematic and unsystematic risks and their implications for portfolio diversification.
Verified Answer
NR
nathalie rodrigezJul 12, 2024
Final Answer :
D
Explanation :
Systematic risks refer to the overall market risks that affect nearly all assets to some degree. These are risks that cannot be diversified away and are linked to broader economic, political, or social factors. Examples include inflation, interest rate changes, and recessions.
Learning Objectives
- Identify the distinctions between systematic and unsystematic risks and their implications for portfolio diversification.