Total risk equals _________________.
A) market risk plus ﬁrm-speciﬁc risk,
B) ﬁrm-speciﬁc risk plus diversiﬁable risk,
C) systematic risk minus unsystematic risk,
D) diversiﬁable risk plus unsystematic risk,
E) market risk plus non-diversiﬁable risk,

Question

Quizplus · Accepted Answer

Total risk consists of both market risk and firm-specific risk. Market risk is the risk that affects the overall market and cannot be diversified away while firm-specific risk is the risk that is specific to a particular company and can be diversified away. Therefore, the sum of these two risks will give us the total risk.

Total Risk Equals _________________