Total risk equals systematic risk plus unsystematic risk.

Question

Quizplus · Accepted Answer

Total risk is composed of two types of risk: systematic risk (also known as market risk) and unsystematic risk (also known as specific risk). Systematic risk refers to the risk that is inherent in the overall market or economy and affects most or all securities to some degree. Unsystematic risk pertains to the specific risks of an individual security or industry that can be diversified away by the investor. Therefore, total risk is the sum of these two types of risk.

Total Risk Equals Systematic Risk Plus Unsystematic Risk