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Asked by Andrea Madison on Jun 28, 2024

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No matter how much total risk an asset has, only the unsystematic portion is relevant in determining the expected return on that asset.

Unsystematic Portion

The segment of risk in an investment portfolio that can be mitigated through diversification, specific to individual securities.

Expected Return

The weighted average of all possible returns for an investment, with weights representing the probabilities of each outcome.

Total Risk

The entire range of uncertainties including market and specific risks that affect the value of an investment.

  • Understand the divergences between systematic and unsystematic risk.
  • Discern the repercussions various risks enact on the worth and returns of assets.
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ZK
Zybrea KnightJul 05, 2024
Final Answer :
False
Explanation :
The expected return on an asset is influenced by both systematic and unsystematic risk, but in a diversified portfolio, unsystematic risk is considered diversifiable, leaving systematic risk as the primary concern for determining expected return.

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