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

Question

Quizplus · Accepted Answer

The risk premium of a security is determined by its systematic risk, which affects the entire market and cannot be diversified away, and does not depend on its unsystematic risk, which is specific to individual securities and can be reduced through diversification.

The Risk Premium of a Security Is Determined by Its