Consider the following two statements about systematic and unsystematic risk: (i) News about GNP is always related to systematic risk.
(ii) News about the CEO of a company is only unsystematic if it was not expected.
A)(i) is correct, and (ii) is incorrect.
B)(ii) is correct and (i) is incorrect.
C)Both (i) and (ii) are correct.
D)Both (i) and (ii) are incorrect.
E)News is not related to risk.

Question

Quizplus · Accepted Answer

Systematic risk is related to the overall market and cannot be diversified away. News about GNP affects the entire market, making it a systematic risk. However, it's not "always" related to systematic risk as the statement implies, because the impact can vary. Unsystematic risk is specific to a company or industry and can be diversified away. News about a CEO can affect the company's stock, making it unsystematic risk, regardless of whether it was expected or not. Therefore, both statements are incorrect in their absolutes.

Consider the Following Two Statements About Systematic and Unsystematic Risk