Unsystematic risk can be eliminated through diversification.

Question

Quizplus · Accepted Answer

Diversification involves investing in a variety of securities across different industries or asset classes to reduce the impact of unsystematic risk. By doing so, an investor can effectively eliminate the risk associated with individual securities or specific industries while still earning a return on their investment. However, systematic risk cannot be diversified away because it affects the entire market or economy.

Unsystematic Risk Can Be Eliminated Through Diversification