SIE Exam Question 600: Answer and Explanation

Question: 600

Which of the following describes the relationship between total risk, systematic risk, and unsystematic risk?

• A. Total risk = Systematic risk - Unsystematic risk
• B. Total risk - Systematic risk = Unsystematic risk
• C. Total risk + Unsystematic risk = Systematic risk
• D. Unsystematic risk - Total risk = Systematic risk

Correct Answer: B

Explanation:

Total risk = Systematic risk + Unsystematic risk. This formula can be rewritten as: Total risk - Systematic risk = Unsystematic risk.