Question: Define and differentiate between unsystematic risk and systematic risk. Question content area bottom Part 1 Choose the correct answer below. A. An unsystematic risk is

Define and differentiate between unsystematic risk and systematic risk.

Question content area bottom

Part 1

Choose the correct answer below.

An unsystematic risk is a risk that cannot be reduced or eliminated through market transactions; a systematic risk is a risk that can be reduced or eliminated through market transactions.

An unsystematic risk is a risk that can be reduced or eliminated through market transactions; a systematic risk is a risk that cannot be reduced or eliminated through market transactions.

An unsystematic risk is a risk that affects all companies, industries, or countries; a systematic risk is a risk that is specific to a company, an industry, or a country.

An unsystematic risk is a risk that is specific to a company, an industry, or a country; a systematic risk is a risk that affects all companies, industries, or countries.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Decide whether the following statement makes sense (or is clearly true) or does not make sense (or is clearly false). Explain your reasoning. I bought a fund advertised on the web that says it uses a...

1. An increase in accounts receivable is a _____ of funds and a decrease in long-term debt is a _____ of funds. Question content area bottom Part 1 A. source; use B. use; source C. source; source D....

Consider an entrepreneur with the following investment opportunity. For an initConsider an entrepreneur with the following investment opportunity. For an initial investment of $ 8 0 0 this year, a...

The following are beta's for a Microsoft during four time periods. Compare the four estimated betas. What do you conclude about how Microsoft's exposure to systematic risk has changed over that...

You are trying to develop a strategy for investing in two different stocks. The anticipated annual return for a $ 1 , 0 0 0 investment in each stock under four different economic conditions has the...

Which of the following statements is FALSE? Question content area bottom Part 1 A . The risk premium for diversifiable risk is zero, so investors are not compensated for holding firmminus specific...

Suppose the market portfolio has an expected return of 1 0 % 1 0 % and a volatility of 2 0 % 2 0 % , while MicrosoftMicrosoft ' s stock has a volatility of 3 0 % 3 0 % . a . Given its higher...

After-tax cost of debtPersonal Finance ProblemBella Wans is interested in buying a new motorcycle. She has decided to borrow the money to pay the $25,000 purchase price of the bike. She is in the 33%...

In the capital asset pricing model, the beta coefficient is a measure of ________. Question content area bottom Part 1 A. businessspecific risk B. nonaggregate risk C. nondiversifiable risk D....

Were American adults watching more television (TVHOURS) in 2012 than they were in 2010? Conduct a test to answer the question.

York Company is considering a capital expenditure with the following estimated net cash inflows: YearEstimated Pretax Inflation Adjusted Net Cash Inflow 1...

Executive stock options: 3 . 5 pointsMultiple Choice 8 0 2 - 1 3 - 4 3 permit executives to purchase restricted stock.Referencesallow the holder the option to buy shares at a specified exercise price...

On 1 March 2007 DB Limited issued R560 000 15% debentures at R98. The debentures were to be redeemed at par in four equal annual payments starting 28 February 2010. Required: Journalise the above...