The risk premium of a security is determined by its ________ risk and does not depend on its ________ risk.
A)diversifiable, diversifiable
B)systematic, undiversifiable
C)systematic, unsystematic
D)all of the above

Question

Quizplus · Accepted Answer

The risk premium of a security is determined by its systematic risk, which is the portion of risk that cannot be diversified away, and does not depend on its unsystematic risk, which is the portion of risk that can be diversified away. Therefore, choices A and B are incorrect. Choice D is also incorrect as it includes both correct and incorrect statements.

The Risk Premium of a Security Is Determined by Its