Concept Review: Risky investments have various types of risk. Understanding the characteristics of those various types is fundamental to understanding the important principle of diversification and how taking on risk is rewarded in the marketplace. (Chapter 11-3 Systematic Risk Principle) Drag and drip each risk characteristic into the appropriate risk type. SYSTEMATIC RISK UNSYSTEMATIC RISK TOTAL RISK

(ELIMINATED BY PURCHASING 30 STOCKS) (DIVERSIFIABLE RISK) (ASSET-SPECIFIC RISK) (UNIQUE RISK) (THIS TYPE OF RISK DESERVES A RISK PREMIUM) (MARKET RISK) (MEASURED BY BETA) (NONDIVERSIFIABLE RISK) (MEASURED BY STANDARD DEVIATION) (SYSTEMATIC RISK PLUS UNSYSTEMATIC RISK)