Asked by Raymond Shaquille on Jul 12, 2024
Verified
Which of the following statements is false?
A) Total risk = market risk + unique risk.
B) Total risk = systematic risk + unsystematic risk.
C) Market risk = non-diversifiable risk + asset-specific risk.
D) Announcement = expected part + surprise.
E) Total return = expected return + unexpected return.
Total Risk
The complete set of risks associated with an investment, including both systematic and unsystematic risks.
Systematic Risk
Refers to the risk inherent to the entire market or market segment that cannot be mitigated through diversification.
Unsystematic Risk
The danger linked to a particular corporation or sector that can be minimized by spreading investments.
- Discern and compare the aspects of systematic (market) risk with those of unsystematic (unique) risk, considering their implications on the process of investment decision-making.
Verified Answer
JM
Jahlyn MckieJul 15, 2024
Final Answer :
C
Explanation :
Market risk is synonymous with systematic or non-diversifiable risk and does not include asset-specific risk, which is a component of unique or unsystematic risk.
Learning Objectives
- Discern and compare the aspects of systematic (market) risk with those of unsystematic (unique) risk, considering their implications on the process of investment decision-making.