Which of the following is the only risk that is relevant to a rational, diversified investor?
A) Diversifiable risk
B) Stand-alone risk
C) Market risk
D) Unsystematic risk
E) Firm-specific risk

Question

Quizplus · Accepted Answer

The only risk that is relevant to a rational, diversified investor is Market risk, which is the risk that affects all investments in the market. A diversified investor can eliminate or reduce diversifiable risk, stand-alone risk, unsystematic risk, and firm-specific risk by holding a diversified portfolio. Therefore, the only risk that cannot be eliminated through diversification is the Market risk.

Which of the Following Is the Only Risk That Is