Which of the Following Statements About the Various Kinds of Risks

Multiple Choice

Which of the following statements about the various kinds of risks and their associated market reward is true?

A) Liquidity risk is a market risk, hence not rewarded by the market.
B) Default risk is a firm-specific risk, hence rewarded by the market.
C) Exchange rate risk is a diversifiable risk, hence not rewarded by the market.
D) Inflation risk is an unsystematic risk, hence not rewarded by the market.
E) Interest rate risk is a systematic risk, hence rewarded by the market.