{"id":44662,"date":"2024-04-15T21:46:55","date_gmt":"2024-04-15T21:46:55","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=44662"},"modified":"2024-04-15T21:46:55","modified_gmt":"2024-04-15T21:46:55","slug":"market-risk-and-diversifiable-risk-are-two-components-of","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/market-risk-and-diversifiable-risk-are-two-components-of\/","title":{"rendered":"Market risk and diversifiable risk are two components of"},"content":{"rendered":"<p>\r\n    <!-- Check if it's an AMP page -->\r\n            <!-- Non-AMP version -->\r\n        <div class=\"mcq-container\" data-quiz-id=\"quizState_6a976ad85521f\">\r\n                                            <div class=\"option\" data-option-key=\"option1\" data-is-correct=\"false\">\r\n                    stock&#039;s risk                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option2\" data-is-correct=\"true\">\r\n                    portfolio risk                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option3\" data-is-correct=\"false\">\r\n                    expected return                <\/div>\r\n                                            <div class=\"option\" data-option-key=\"option4\" data-is-correct=\"false\">\r\n                    stock return                <\/div>\r\n                            \r\n            <!-- Feedback messages for non-AMP -->\r\n            <div class=\"feedback\" data-feedback=\"wrong\">Answer is Right!<\/div>\r\n            <div class=\"feedback\" data-feedback=\"right\">Answer is Wrong!<\/div>\r\n        <\/div>\r\n\r\n        <script>\r\n        document.addEventListener('DOMContentLoaded', function () {\r\n            var containers = document.querySelectorAll('.mcq-container');\r\n\r\n            containers.forEach(function(container) {\r\n                var options = container.querySelectorAll('.option');\r\n                var feedbackSelect = container.querySelector('[data-feedback=\"select\"]');\r\n                var feedbackWrong = container.querySelector('[data-feedback=\"wrong\"]');\r\n                var feedbackRight = container.querySelector('[data-feedback=\"right\"]');\r\n\r\n                options.forEach(function(option) {\r\n                    option.addEventListener('click', function() {\r\n                        var selectedOption = option.getAttribute('data-option-key');\r\n                        var isCorrect = option.getAttribute('data-is-correct') === 'true';\r\n\r\n                        \/\/ Remove previous selections\r\n                        options.forEach(function(opt) {\r\n                            opt.classList.remove('correct', 'incorrect');\r\n                        });\r\n\r\n                        \/\/ Add the correct\/incorrect class\r\n                        if (isCorrect) {\r\n                            option.classList.add('correct');\r\n                            feedbackRight.hidden = false;\r\n                            feedbackWrong.hidden = true;\r\n                        } else {\r\n                            option.classList.add('incorrect');\r\n                            feedbackRight.hidden = true;\r\n                            feedbackWrong.hidden = false;\r\n                        }\r\n\r\n                        \/\/ Hide select feedback\r\n                        feedbackSelect.hidden = true;\r\n                    });\r\n                });\r\n            });\r\n        });\r\n        <\/script>\r\n    \r\n    <!--more--><\/p>\n<p>The correct answer is: <strong>B. portfolio risk<\/strong><\/p>\n<p>Market risk is the risk that all stocks share, and it cannot be diversified away. Diversifiable risk is the risk that is specific to a particular stock, and it can be diversified <div class=\"youtube-subscribe-container\">\r\n        <a href=\"https:\/\/www.youtube.com\/channel\/UCNHT8lW-JmLC68rjBfZhdkg?sub_confirmation=1\" target=\"_blank\" class=\"youtube-subscribe-button\">\r\n            <span class=\"youtube-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 576 512\">\r\n                    <path d=\"M549.7 124.1c-6.3-23.7-24.8-42.3-48.3-48.6C458.8 64 288 64 288 64S117.2 64 74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Subscribe on YouTube\r\n        <\/a>\r\n    <\/div> away by holding a portfolio of stocks.<\/p>\n<p>A stock&#8217;s risk is the sum of its market risk and its diversifiable risk. <div class=\"telegram-channel-container\">\r\n        <a href=\"https:\/\/t.me\/pscnotes2025\" target=\"_blank\" class=\"telegram-channel-button\">\r\n            <span class=\"telegram-icon\">\r\n                <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" viewBox=\"0 0 496 512\">\r\n                    <path fill=\"white\" d=\"M248,8C111,8,0,119,0,256s111,248,248,248s248-111,248-248S385,8,248,8z M362,177L320,367c-3,14-10,18-20,14l-56-41l-27,26 c-3,3-5,5-10,5l4-63L323,196c5-5-1-7-8-3l-98,62l-42-13c-9-3-10-9,2-14l162-63C351,160,365,164,362,177z\"\/>\r\n                <\/svg>\r\n            <\/span>\r\n            Join Our Telegram Channel\r\n        <\/a>\r\n    <\/div> The expected return of a portfolio is the weighted average of the expected returns of the stocks in the portfolio. The stock return is the actual return that a stock earns over a given period of time.<\/p>\n<p>Here is a more detailed explanation of each option:<\/p>\n<ul>\n<li><strong>A. stock&#8217;s risk<\/strong><\/li>\n<\/ul>\n<p>A stock&#8217;s risk is the sum of its market risk and its diversifiable risk. Market risk is the risk that all stocks share, and it cannot be diversified away. Diversifiable risk is the risk that is specific to a particular stock, and it can be diversified away by holding a portfolio of stocks.<\/p>\n<ul>\n<li><strong>B. portfolio risk<\/strong><\/li>\n<\/ul>\n<p>Portfolio risk is the risk of a portfolio of stocks. It is the sum of the market risk and the diversifiable risk of the stocks in the portfolio. The market risk of a portfolio cannot be diversified away, but the diversifiable risk can be diversified away by holding a large enough portfolio.<\/p>\n<ul>\n<li><strong>C. expected return<\/strong><\/li>\n<\/ul>\n<p>The expected return of a portfolio is the weighted average of the expected returns of the stocks in the portfolio. The expected return of a stock is the probability-weighted average of the possible returns of the stock.<\/p>\n<ul>\n<li><strong>D. stock return<\/strong><\/li>\n<\/ul>\n<p>The stock return is the actual return that a stock earns over a given period of time. The stock return is calculated by taking the difference between the stock price at the end of the period and the stock price at the beginning of the period, and then dividing by the stock price at the beginning of the period.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Subscribe on YouTube<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Market risk and diversifiable risk are two components of<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/market-risk-and-diversifiable-risk-are-two-components-of\/\" \/>\n<meta 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