Investors are rewarded for assuming
A) total risk.
B) diversifiable risk.
C) nondiversifiable risk.
D) any type of risk.

Question

Quizplus · Accepted Answer

Investors are rewarded for assuming nondiversifiable risk, also known as systematic or market risk, because it cannot be eliminated through diversification. Diversifiable risk, on the other hand, can be mitigated through a well-diversified portfolio, so investors are not typically rewarded for assuming it. Total risk includes both diversifiable and nondiversifiable risk, but the reward primarily comes from the nondiversifiable portion.

Investors Are Rewarded for Assuming