Which of the following statements are correct concerning diversifiable,or unsystematic,risks?
i.Diversifiable risks can be largely eliminated by investing in 50 unrelated securities.II.There is no reward for accepting diversifiable risks.III.Diversifiable risks are generally associated with an individual firm or industry.IV.Beta measures diversifiable risk.
A) I and III only
B) II and IV only
C) I and IV only
D) I,II,and III only
E) I,II,III,and IV

Question

Quizplus · Accepted Answer

I. Diversifiable risks can indeed be largely eliminated through diversification, such as by investing in a broad portfolio of unrelated securities. II. There is no additional expected reward for taking on diversifiable risk because it can be eliminated through diversification. III. Diversifiable risks are specific to an individual firm or industry, such as risks related to management decisions or industry-specific factors. IV. Beta measures systematic risk, not diversifiable risk, so this statement is incorrect.

Which of the Following Statements Are Correct Concerning Diversifiable,or Unsystematic,risks