Which of the Following Statements About the Various Kinds of Risks

question 2

Multiple Choice

Which of the following statements about the various kinds of risks is correct?

• A)Economic risk is a market risk, hence it should not be rewarded by the market.
• B)A firm's default risk is a diversifiable risk, hence it should be rewarded by the market.
• C)Exchange rate risk is a diversifiable risk, hence it should not be rewarded by the market.
• D)Inflation risk is an unsystematic risk, hence it should not be rewarded by the market.
• E)Interest rate risk is a systematic risk, hence it should be rewarded by the market.

---

Definitions:

Stock Options

Financial derivatives allowing the holder to buy or sell specific shares at a predetermined price within a set time frame.

Customary Type

Practices or items that are traditional or expected within a certain context or society.

Dividend

A portion of a company's earnings distributed to its shareholders, usually in the form of cash or additional stock.

Properly Declared

Refers to actions or decisions that are formally announced or made known in accordance with established procedures or laws.