The part of a security's risk associated with random outcomes generated by events or behaviors specific to the firm is known as _____.
A)nondiversifiable risk
B)unsystematic risk
C)market risk
D)systematic risk
E)relevant risk

Question

The part of a security's risk associated with random outcomes generated by events or behaviors specific to the firm is known as _____. 
A)nondiversifiable risk
B)unsystematic risk
C)market risk
D)systematic risk
E)relevant risk

Quizplus · Accepted Answer

Unsystematic risk, or specific risk, is the portion of a security's risk that is specific to the firm or industry and is not related to overall market trends. It is also known as idiosyncratic risk or company-specific risk. This type of risk can be diversified away by holding a diversified portfolio of securities.

The Part of a Security's Risk Associated with Random Outcomes