The unexpected return on a security is made up of:
A)market risk and systematic risk.
B)systematic risk and unsystematic risk.
C)idiosyncratic risk and unsystematic risk.
D)expected return and market risk.
E)expected return and idiosyncratic risk.

Question

Quizplus · Accepted Answer

The unexpected return on a security is typically composed of systematic risk and unsystematic risk. Systematic risk is the risk that affects the overall market, while unsystematic risk relates to factors specific to a particular company or industry. This combination of risks results in unexpected fluctuations in a security's returns. Option A is incorrect because market risk is a component of systematic risk, which is already included in option B. Option C is incorrect because idiosyncratic risk is a type of unsystematic risk, which is already included in option B. Option D and E are also incorrect because they only include one component of the unexpected return, whereas the question specifically refers to the combination of risks.

The Unexpected Return on a Security Is Made Up Of