Which of the following statements about the various kinds of risks and their associated market reward is true?
A) Liquidity risk is a market risk, hence not rewarded by the market.
B) Default risk is a firm-specific risk, hence rewarded by the market.
C) Exchange rate risk is a diversifiable risk, hence not rewarded by the market.
D) Inflation risk is an unsystematic risk, hence not rewarded by the market.
E) Interest rate risk is a systematic risk, hence rewarded by the market.

Question

Quizplus · Accepted Answer

Interest rate risk is a systematic risk that affects the entire market and is therefore rewarded by the market.

Which of the Following Statements About the Various Kinds of Risks