Diversifiable risk is the only risk that affects the required rate of return because nondiversifiable risk can be eliminated.

Question

Quizplus · Accepted Answer

Nondiversifiable risk, also known as systematic risk, cannot be eliminated through diversification. It is a risk that affects the overall market or economy and cannot be diversified away. Therefore, it does affect the required rate of return. Diversifiable risk, also known as unsystematic risk, can be eliminated through diversification and does not affect the required rate of return.

Diversifiable Risk Is the Only Risk That Affects the Required