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Another name for systematic risk is: Unique risk None of these are correct Diversifiable risk Firm-specific riski
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- According to the CAPM, which of the following risks is irrelevant? Select one: a. Unsystematic risk b. Systematic risk c. All risks are always relevant d. Market riskWhat type of risk can NOT be eliminated through diversification? Systematic risk Unsystematic risk (or nonsystematic risk) Total riskThe systematic risk principle states that the expected return on a risky asset depends only on which one of the following? Unsystematic risk Market risk Diversifiable risk
- Systematic risk is diversifiable, so it is an investment's relevant risk. Unsystematic risk is O True FalseBriefly define and give examples of each of the following components of total risk. Which type of risk matters, and why? Diversifiable (or firm-specific) risk Undiversifiable (or systematic) riskMarket risk is portion of a security's stand-alone risk that cannot be eliminated through diversification. True False
- Give an example of a risk that is clearly a diversifiable risk and one that is clearly a non-diversifiable risk.Which of the following statements is true? Select one: Total risk = market risk + unique risk. Total risk = systematic risk + undiversifiable risk. Total risk = unique risk + diversifiable risk Market risk = undiversifiable risk + systematic risk. Total risk = diversifiable risk + firm-specific risk.What type of risk is the risk that belongs to the market as a whole? Systematic risk Unsystematic risk (or nonsystematic risk) Total risk
- Explain why diversification reduces unsystematic risk but not systematic risk.Risk can be separated into undiversifiable risk and diversifiable risk. Discuss the differencebetween the two risksThis type of risk affects a large number of assets, each to a greater or lesser degree. Group of answer choices systematic risk unsystematic risk idiosynchratic risk principle of diversification