A portfolio of stocks fluctuates when the treasury yields change.Since this risk can not be eliminated through diversification,it is called __________.
A) firm specific risk
B) systematic risk
C) unique risk
D) none of the above

Question

Quizplus · Accepted Answer

Systematic risk, also known as market risk, is the risk that affects all securities in the market, and cannot be diversified away by holding a diverse portfolio. Fluctuations in the treasury yields can impact the overall market and cause stock prices to move in the same direction, resulting in systematic risk. Options A and C refer to firm-specific or unique risks, which are risks that only affect individual companies and can be diversified away by including other securities in the portfolio. Option D is incorrect as there is a specific type of risk that cannot be diversified away.

A Portfolio of Stocks Fluctuates When the Treasury Yields Change