Unsystematic risk is defined as the risk that:
A) Affects almost every financial asset that is sold in the marketplace.
B) Relates to the overall economy, such as inflation and GDP growth.
C) Serves as the basis for determining the amount of the risk premium.
D) Is derived from an event that affects a single firm or a limited number of assets.
E) Is generated by expected news.

Question

Quizplus · Accepted Answer

Unsystematic risk, also known as specific risk, is unique to a single company or industry. It can be mitigated through diversification, unlike systematic risk which affects the entire market. Option D accurately describes unsystematic risk as it pertains to events affecting only a single firm or a limited number of assets.

Unsystematic Risk Is Defined as the Risk That