Question

Systematic risk

Select one:

a. is unique to a company or industry.

b. describes the total risk of a stock or fund.

c. All of these are true statements.

d. is a risk that affects a large number of stocks.

e. is also known diversifiable risk.

Answer 1

Ans: Systematic risk is d. is a risk that affects a large number of stocks.

Explanation:

Systematic risk is the inherent risk that exist in the entire market. Systematic risk unlike unsystematic risk which is company or industry specific cannot be diversified and thus is also known as “undiversifiable risk or market risk and it affects the overall market. Systematic risk is unpredictable. Also, it cannot be reduced through diversification. For example: Change in interest rate, increase or Decrease in inflation rates, recessions, wars, political changes, etc.

False a. is unique to a company or industry. Unsystematic risk is company or industry specific.

False b. describes the total risk of a stock or fund. Total risk of stock = Systematic risk + Unsystematic risk

False c. All of these are true statements.

False e. is also known diversifiable risk. Systematic risk cannot be diversified