Asked by Rebika Basnet on Jun 26, 2024
Verified
Diversifiable risk is:
A) measured by beta.
B) company-specific.
C) the unsystematic risk.
D) Both b & c
Diversifiable Risk
A risk that can be reduced or eliminated from a portfolio through diversification, not linked to the market's movements as a whole.
Company-Specific
Company-Specific refers to factors or risks that affect an individual company's performance, distinct from broader market or industry factors.
Unsystematic Risk
The risk associated with a specific company or industry, which can be mitigated through diversification.
- Identify the significance of diversification in mitigating unsystematic risk.
- Acquire knowledge on the variance between diversifiable and non-diversifiable risks.
Verified Answer
ET
Elias TwerskyJun 28, 2024
Final Answer :
D
Explanation :
Diversifiable risk refers to company-specific or unsystematic risk, which is unique to a particular company or industry and can be reduced or eliminated through diversification. This type of risk cannot be measured by beta, which is a measure of systematic or market risk. Therefore, the correct answer is D, both b & c.
Learning Objectives
- Identify the significance of diversification in mitigating unsystematic risk.
- Acquire knowledge on the variance between diversifiable and non-diversifiable risks.