D. Security market line. E. market risk premium. QUESTION 23 Which of the follow

Question

D. Security market line. E. market risk premium. QUESTION 23 Which of the following statements are true statements regarding systematic risk? I. Systematic risk can be effectively eliminated through portfolio diversification. Il. Systematic risk is compensated for by a risk premium. Ill. Systematic risk is measured by beta IV. As rational investors hold well-diversified portfolios, the market will not pay a risk premium for holding systematic risk. AI and IV only B. II only 0 C. 1,111, and only D. Il and Ill only E. IlIl and IV only

Explanation / Answer

correct answer is D(II and III),systematic or non-diversifiable risk is priced and investors are compensated for holding assets or portfolios based only on that investment’s systematic risk.beta captures an asset’s systematic risk, or the portion of an asset’s risk that cannot be eliminated by diversification.

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