Question

The _____ tells us that the expected return on a risky asset depends only on that asset's nondiversifiable risk.

Answer 1

Answer:

b. systematic risk principle

Explanation:

Here are the options to this question :

a. efficient markets hypothesis

b. systematic risk principle

c. open markets theorem

d. law of one price

e. principle of diversification

The systemic risk principle states that the expected return on an asset depends only on the systemic risks because  diversification eliminates company specific risk.

Systemic risk is risk that cannot be eliminated by diversification.

Non systemic risk is risk that can be eliminated by diversification. it is risk peculiar to a company