Total risk can be divided into:
A) standard deviation and variance.
B) standard deviation and covariance.
C) portfolio risk and beta.
D) systematic risk and unsystematic risk.
E) portfolio risk and covariancE.

Question

Quizplus · Accepted Answer

Total risk is composed of two parts - systematic risk and unsystematic risk. Systematic risk is the risk that arises due to macroeconomic factors such as changes in interest rates or political instability, and affects the entire market, while unsystematic risk is specific to a particular company or industry. Therefore, option D, which divides total risk into systematic and unsystematic risk, is the correct choice. Option A (standard deviation and variance) and B (standard deviation and covariance) are both measures of risk but do not differentiate between systematic and unsystematic risk. Option C (portfolio risk and beta) and E (portfolio risk and covariance) are both related to portfolio management and do not address the different types of risk.

Total Risk Can Be Divided Into