Unsystematic Risk

question 96

Multiple Choice

Unsystematic risk:

• A)can be effectively eliminated through portfolio diversification.
• B)is compensated for by the risk premium.
• C)is measured by beta.
• D)cannot be avoided if you wish to participate in the financial markets.
• E)is related to the overall economy.

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Definitions:

Perfectly Elastic

Describes a situation in demand or supply where quantity changes by an infinite amount in response to any change in price.

Economic Profits

The difference between total revenues and total costs, including both explicit and implicit costs, representing the surplus generated from business operations beyond the normal returns.

Hired Managers

Individuals employed by the owners of a firm to run the day-to-day operations and make business decisions.

Business Corporations

Legal entities that are formed to engage in business activities, owned by shareholders who share in the profits but are typically not liable for the company's debts.