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Sagot :
Answer:
A
Explanation:
Systemic risk are risk that are inherent in the economy. They cannot be diversified away. They are also known as market risk. examples of this risk include recession, inflation, and high interest rates. Investors should seek compensation for systemic risk. Systemic risk is measured by beta. The higher beta is, the higher the systemic risk and the higher the compensation demanded for by investors
the systemic risk of portfolio A = 1
systemic risk of portfolio B = (proportion of Gourmet Restaurant's stock x beta of Gourmet Restaurant's stock) + (proportion of Suppertime Restaurant's stock x beta of Suppertime Restaurant's stock)
([tex]\frac{500}{1500}[/tex] × 0.6) + ([tex]\frac{1000}{1500}[/tex] × 1.4) = 0.2 + 0.9 = 1.1
Portfolio B has a higher beta and thus a higher systemic risk than Portfolio A
Non systemic risk are risks that can be diversified away. they are also called company specific risk. Examples of this type of risk is a manager engaging in fraudulent activities.
Portfolio A is more diversified than portfolio B. Thus, Portfolio B has a higher non-systemic risk
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