Peregrine Foundations of Business Finance Practice Test 2025 – Your Complete All-In-One Study Guide for Exam Success!

Question: 1 / 400

Which of the following best describes systematic risk?

Risks that affect an individual business

Risks that stem from broader market factors

Systematic risk is best described as risks that stem from broader market factors. This type of risk is inherent to the entire market or a segment of the market and cannot be mitigated through diversification. Factors contributing to systematic risk include economic changes, political events, changes in interest rates, and global events that impact the overall market environment. Because these risks affect a wide array of investments simultaneously, they remain a fundamental concern for investors looking to manage the risk in their portfolios. Understanding systematic risk is crucial for making informed investment decisions, as it highlights the importance of considering the potential impact of macroeconomic conditions on investment performance.

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Risks that can be eliminated through diversification

Risks that only impact specific industries

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