Scenario 14: Which of the following describes a 'systematic risk' in investments?

Question: Scenario 14: Which of the following describes a 'systematic risk' in investments?

Answer options:

• Risk that can be eliminated through diversification.
• Risk specific to a particular company or industry. ✅ Risk inherent to the entire market or economy and cannot be diversified away.
• Risk of an investment not meeting its stated objectives.

Correct answer: Risk inherent to the entire market or economy and cannot be diversified away.

Explanation: Systematic risk (also known as market risk or non-diversifiable risk) affects all investments in the market and arises from macroeconomic factors like inflation, interest rates, or geopolitical events. It cannot be reduced by diversifying a portfolio. The correct answer is "Risk inherent to the entire market or economy and cannot be diversified away.". This capacity-fill scenario 14 reinforces the same competency for the ific bank and follows the certified explanation standard.