Systematic Risk

question 55

Multiple Choice

Systematic risk:

• A) is the risk eliminated through diversification.
• B) represents the risk affecting a specific company.
• C) cannot be eliminated through diversification.
• D) is another name for risk unique to an individual asset.

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Definitions:

SML

Security Market Line, a graphical representation of the expected return of investments as a function of their risk, as measured by beta.

Vertical Intercept

The point where a graphed line crosses the vertical axis, often used in mathematical functions to determine a starting point.

Required Rate

The minimum return an investor expects to achieve on an investment, considering the risk level associated with the investment.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, used in statistics to quantify the variability or spread of a data set.