Systematic risk is rewarded with a premiumhigher returns in the market because:
A)it is associated with market movements which cannot be eliminated through diversification
B)it is a microeconomic risk
C)that risk is unique to a firm or an industry
D)none of the above

Question

Quizplus · Accepted Answer

Systematic risk, also known as market risk, affects the entire market and cannot be eliminated through diversification. As a result, investors are rewarded with a premium in the form of higher returns for taking on this risk. Option B is incorrect because systematic risk is not a microeconomic risk, but rather a macroeconomic one. Option C is also incorrect because systematic risk is not unique to a single firm or industry, but affects the entire market. Option D is incorrect because A is the correct answer.

Systematic Risk Is Rewarded with a Premiumhigher Returns in the Market