Systematic risk is: A. totally eliminated when a portfolio is fully diversified. B. defined as the total risk associated with surprise events. C. risk that affects a limited number of securities.
Systematic risk is another name for nondiversifiable risk. IV. Diversifiable risks are market risks you cannot avoid. A. I and III only B. II and IV only C. I and II only D. III and IV only E. I, II, and III only A The primary purpose of portfolio diversification is to: A. increase returns and risks. B. eliminate all risks.
I. Systematic risk is measured by beta. II. The risk premium increases as unsystematic risk increases. III. Systematic risk is the only part of total risk that should affect asset prices and returns.
Unique risk A. I and IV only B. II and III only C. I, II, and IV only D. II, III, and IV only E. I, II, III, and IV
Systematic risk is risk that impacts the entire market or a large sector of the market, not just a single stock or industry. Examples include natural disasters, weather events, inflation, changes in interest rates, war, even terrorism.
What Are the Types of Unsystematic Risk? There are five types of unsystematic risk: business risk, financial risk, operational risk, strategic risk, and legal or regulatory risk.
Types of Systematic Risk. Systematic risk includes market risk, interest rate risk, purchasing power risk, and exchange rate risk.
Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).