Answer (B) is correct. Systematic risk, also called market risk and undiversifiable risk, is the risk of the stock market as a whole. Some conditions in the national economy affect all businesses, which is why equity prices so often move together. The effect of an individual security on the volatility of a portfolio is measured by its sensitivity to movements by the overall market. This sensitivity is stated in terms of a stock’s beta coefficient. An average-risk stock has a beta of 1.0 because its returns are perfectly positively correlated with those on the market portfolio.