Question

In: Finance

Systematic risk of financial assets: Group of answer choices can be effectively eliminated by portfolio diversification....

Systematic risk of financial assets:

Group of answer choices

can be effectively eliminated by portfolio diversification.

is not priced risk

is measured by beta.

is measured by standard deviation.

is related to the industry specific factors.

Solutions

Expert Solution

Total risk is a sum of systematic risk and Unsystematic risk

Systematic Risk - the risk associated with the overall market. Systematic risk cannot be eliminated through diversification and Beta is a measure of systematic risk. Beta is a measure of the systematic risk of a particular financial asset

Unsystematic risk or Diversifiable risk - Unsystematic risk is specific to a particular firm or industry, such types of risk can be eliminated through diversification

Systematic risk of financial assets is measured by beta

Correct Answer -> is measured by beta


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