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SIE practice questionhardSystematic Risk — Types

All of the following are types of systematic risk EXCEPT:

  1. AInterest rate risk
  2. BInflation risk
  3. CBusiness risk✓ Correct answer
  4. DMarket risk
Explanation

Why C — Business risk

Business risk is UNSYSTEMATIC (company-specific) — it relates to a particular company's operations, management, competition, and industry conditions. Systematic risks affect the entire market: interest rate risk (A), inflation risk (B), market risk (D), plus currency risk and political risk. Systematic risk cannot be diversified away; unsystematic (business) risk can be reduced through diversification.

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