Which Two of the Statements Accurately Relate to Unsystematic Risk

question 18

Multiple Choice

Which two of the statements accurately relate to unsystematic risk?

• A) Unsystematic risk can be accurately measured using beta.
• B) Unsystematic risk highlights risks common to all firms.
• C) An efficient market will not reward unsystematic risk.
• D) Unsystematic risk can be eliminated by diversification.

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Definitions:

Modified Duration

A formula used to determine the sensitivity of a bond's price to a 1% change in interest rates, indicating the percentage change in price for each percentage point change in yields.

Market Yield

The current annual income returned on an investment, measured as a percentage of the investment's market price.

Zero-Coupon

A type of bond that does not pay periodic interest payments and is instead sold at a discount to its face value, with the full face value received by the holder at maturity.