Asked by Chantal Taylor on Jul 14, 2024
Verified
Risk that affects at most a small number of assets is called:
A) Portfolio risk.
B) Undiversifiable risk.
C) Market risk.
D) Unsystematic risk.
E) Total risk.
Unsystematic Risk
The risk associated with a specific company or industry, also known as diversifiable risk or idiosyncratic risk.
Market Risk
The risk of losses in positions arising from movements in market prices.
Portfolio Risk
The risk associated with holding a portfolio of investments, reflecting the volatility of returns and potential for loss.
- Recognize the differences and similarities between systematic (market) risk and unsystematic (unique) risk, including their impact on investment decisions.
Verified Answer
WJ
Winstin JosephJul 19, 2024
Final Answer :
D
Explanation :
Unsystematic risk, also known as specific risk, diversifiable risk, or idiosyncratic risk, affects at most a small number of assets. It is unique to a particular company or industry and can be reduced through diversification.
Learning Objectives
- Recognize the differences and similarities between systematic (market) risk and unsystematic (unique) risk, including their impact on investment decisions.