Asked by Kennedy McCarthy on Apr 27, 2024
Verified
An asset's undiversifiable risk is measured by its ______________.
A) Total return.
B) Expected return.
C) Variance of returns.
D) Unexpected component of returns.
E) Beta coefficient.
Undiversifiable Risk
A type of risk inherent to the entire market or market segment that cannot be mitigated through diversification.
Beta Coefficient
The beta coefficient measures the volatility of an investment in relation to the market as a whole, indicating its relative risk.
Variance of Returns
A statistical measurement of the dispersion of returns for a given security or market index, often used as a measure of volatility or risk.
- Comprehend the critical role beta plays in determining the systematic risk in investment portfolios.
Verified Answer
AD
Alyson DiamondApr 27, 2024
Final Answer :
E
Explanation :
An asset's undiversifiable risk, also known as systematic risk, is measured by its beta coefficient. The beta coefficient reflects how an asset's returns move in relation to the overall market, capturing the risk that cannot be eliminated through diversification.
Learning Objectives
- Comprehend the critical role beta plays in determining the systematic risk in investment portfolios.