Which of the following statements concerning risk are correct?
I. Non-diversifiable risk is measured by beta.
II. The risk premium increases as diversifiable risk increases.
III. Systematic risk is another name for non-diversifiable risk.
IV. Diversifiable risks are market risks you cannot avoid.
A) I and III only
B) II and IV only
C) I and II only
D) III and IV only
E) I, II, and III only

Question

Which of the following statements concerning risk are correct?
I.  Non-diversifiable risk is measured by beta.
II. The risk premium increases as diversifiable risk increases.
III. Systematic risk is another name for non-diversifiable risk.
IV. Diversifiable risks are market risks you cannot avoid.
A) I and III only
B) II and IV only
C) I and II only
D) III and IV only
E) I, II, and III only

Quizplus · Accepted Answer

Statement I is correct as non-diversifiable risk is measured by beta. Statement III is also correct, as systematic risk is another term for non-diversifiable risk. Statement II is false as the risk premium decreases as diversifiable risk increases. Statement IV is false as diversifiable risks are market risks that can be avoided through diversification.

Which of the Following Statements Concerning Risk Are Correct