Question

In: Finance

Which of the following types of risk is the least important risk for a diversified investor?...

Which of the following types of risk is the least important risk for a diversified investor?

A:) systematic risk

B:) Undiversifiable risk

C:) market risk

D:) idiosyncratic risk  

Solutions

Expert Solution

Answer - D) idiosyncratic risk

Systematic risk, undiversifiable risk and market risk are all terms to the same concept. This is the portfion of risk that has to be borne by the investor even when he has a well diversified portfolio.

Idiosyncratic risk or diversifiable risk is the standalone risk that can be diversified away - like the risk of corporate governance at a particular firm.

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

If you are a diversified investor in Facebook, which of the following types of risk would...
If you are a diversified investor in Facebook, which of the following types of risk would you include in your discount rate? A. The risk that Mark Zuckerberg will stay on as CEO B. The risk that new privacy laws will restrict data gathering and access C. The risk that users will find a different social media platform to spend their time on. D. The risk that a global economic slowdown will affect how much companies spend on advertising E....
Which of the following types of risk cannot be eliminated by holding a well-diversified portfolio of...
Which of the following types of risk cannot be eliminated by holding a well-diversified portfolio of investments? A Diversifiable risk B Market risk C Portfolio risk D Answers a. and b. are correct. E Answers b. and c. are correct.
For diversified portfolios, which of the following is (are) false? a. the risk of a portfolio...
For diversified portfolios, which of the following is (are) false? a. the risk of a portfolio is less than the weighted average risk of the individual assets in the portfolio if the correlation coefficient is less than one. b. stock held in isolation is more risky than a stock held in a portfolio c. relevant risk of a stock is its contribution of risk to a portfolio d. the unique risk of a portfolio increases as more companies are added...
Why is it important to invest in a diversified portfolio? Which stock risk measure should you...
Why is it important to invest in a diversified portfolio? Which stock risk measure should you care about if you have a diversified portfolio? Can you eliminate all portfolio risk?
Which of the following is true? A. A stock’s systematic risk can be diversified away by...
Which of the following is true? A. A stock’s systematic risk can be diversified away by adding it to a portfolio. B. Investors should not be compensated for bearing nondiversifiable risk. C. Beta is a measure of the nonsystematic risk of an asset. D. None of the answers are correct.
1. Which of these risks will a diversified investor likely not need to worry about? a....
1. Which of these risks will a diversified investor likely not need to worry about? a. A computer hack erases all electronic financial records of everyone in the country. b. A firm's key advertising executives quit to start their own company. c. A highly contagious virus emerges that turns humans into zombies. a. a only b. b only c. c only d. a and b e. a and c f. b and c g. will not need to worry about...
Which of the following items would be the most important to the least important and why?...
Which of the following items would be the most important to the least important and why? Project objectives Goals Sub-phases Tasks Resources Budget Schedule
Which type of risk can be diversified away? Systematic risk. Market risk. Inflation risk. Idiosyncratic risk....
Which type of risk can be diversified away? Systematic risk. Market risk. Inflation risk. Idiosyncratic risk. More than one of the these types of risk can be diversified away.
An investor is faced with two risky asset portfolios (each of which is highly diversified within...
An investor is faced with two risky asset portfolios (each of which is highly diversified within its asset class) – an equity fund and a bond fund. The investor is aware that asset returns are not always normally distributed, but is nonetheless prepared to use the normal distribution as a tool for the estimation of approximate portfolio risks and expected returns. The equity fund has a forecast expected return of +11% pa over the time horizon of 12 months, and...
An investor is faced with two risky asset portfolios (each of which is highly diversified within...
An investor is faced with two risky asset portfolios (each of which is highly diversified within its asset class) – an equity fund and a bond fund. The investor is aware that asset returns are not always normally distributed, but is nonetheless prepared to use the normal distribution as a tool for the estimation of approximate portfolio risks and expected returns. The equity fund has a forecast expected return of +11% pa over the time horizon of 12 months, and...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT