Which of the following statements concerning risk are correct?
i.Systematic risk is measured by beta.II.The risk premium increases as unsystematic risk increases.III.Systematic risk is the only part of total risk that should affect asset prices and returns.IV.Diversifiable risks are market risks you cannot avoid.
A) I and III only
B) II and IV only
C) I and II only
D) III and IV only
E) I,II,and III only

Question

Quizplus · Accepted Answer

i. Systematic risk, which affects the entire market or a large segment of the market, is indeed measured by beta. It represents the sensitivity of a security's returns to market movements. iii. Systematic risk, also known as non-diversifiable risk, is the part of total risk that affects all securities and cannot be eliminated through diversification. It is this risk that should affect asset prices and returns, as investors are not rewarded for bearing risks that could be diversified away.

Which of the Following Statements Concerning Risk Are Correct