Asked by Kimberly Tieman on May 26, 2024
Verified
Standard deviation and beta both measure risk, but they are different in that beta measures
A) both systematic and unsystematic risk.
B) only systematic risk, while standard deviation is a measure of total risk.
C) only unsystematic risk, while standard deviation is a measure of total risk.
D) both systematic and unsystematic risk, while standard deviation measures only systematic risk.
E) total risk, while standard deviation measures only nonsystematic risk.
Systematic Risk
The risk inherent to the entire market or market segment that cannot be mitigated through diversification.
Standard Deviation
A statistical measure of the dispersion or variability of a set of data points, often used in finance to quantify the risk of investment returns.
- Comprehend the principle of beta and its significance in assessing the risk associated with stocks.
- Contrast the characteristics of systematic versus unsystematic risk.
Verified Answer
GH
gabriel hernandezMay 28, 2024
Final Answer :
B
Explanation :
Beta measures only systematic risk, which is the risk inherent to the entire market or market segment. Standard deviation, on the other hand, measures total risk, including both systematic and unsystematic risk.
Learning Objectives
- Comprehend the principle of beta and its significance in assessing the risk associated with stocks.
- Contrast the characteristics of systematic versus unsystematic risk.