The total risk associated with an investment can be divided into _____.
A)systematic risk and nondiversifiable risk
B)firm-specific risk and unsystematic risk
C)market risk and firm-specific risk
D)market risk and nondiversifiable risk
E)firm-specific risk and total risk

Question

The total risk associated with an investment can be divided into _____. 
A)systematic risk and nondiversifiable risk
B)firm-specific risk and unsystematic risk
C)market risk and firm-specific risk
D)market risk and nondiversifiable risk
E)firm-specific risk and total risk

Quizplus · Accepted Answer

Market risk refers to the risk associated with macroeconomic factors such as changes in interest rates and economic conditions that affect the entire market. Firm-specific risk, on the other hand, refers to the risk associated with factors that affect a specific company or industry. Therefore, the total risk is comprised of market risk and firm-specific risk. Thus, choice C, market risk and firm-specific risk, is the best answer. Choices A, B, D, and E may contain overlapping or incorrect terms, making them less accurate options.

The Total Risk Associated with an Investment Can Be Divided