The portion of an asset's risk that is attributable to firm-specific, random causes is called ________.
A) unsystematic risk
B) nondiversifiable risk
C) market risk
D) political risk

Question

Quizplus · Accepted Answer

Unsystematic risk, also known as idiosyncratic risk, refers to the portion of an asset's risk that is specific to the firm and is not affected by the overall market conditions. It is a type of risk that can be diversified away by holding a well-rounded portfolio of assets. Nondiversifiable risk, also known as systematic risk or market risk, refers to the portion of an asset's risk that is inherent to the overall market conditions and cannot be diversified away. Political risk refers to the potential negative impact of political decisions or instability on an investment.

The Portion of an Asset's Risk That Is Attributable to Firm-Specific