Which of the following statements is correct regarding total risk?
A)A conglomerate will have more total risk than a firm that has one line of business.
B)All firms have about the same total risk because they are all exposed to the same market risk.
C)Total risk can be quantified by measuring the covariance between the firm and the overall market.
D)None of these statements is correct.

Question

Quizplus · Accepted Answer

None of the statements are correct. Total risk includes both systematic (market) and unsystematic (firm-specific) risk, and it is not solely determined by the number of business lines or measured by covariance with the market.

Which of the Following Statements Is Correct Regarding Total Risk