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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 1 year ago
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