9. If there are two types of risk (firm-specific and undiversifiable), why do we primarily care about undiversifiable risk?

Undiversifiable risk accounts for most of the risk for every security

Firm-specific risk is impossible to measure

The correlation between firm-specific risk and undiversifiable risk is very high

Investors can diversify their portfolio to reduce firm-specific risk, so they should not be rewarded for being exposed to this type of risk